<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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
<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
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11% Senior Notes Due
June 1, 2007.......... $200,000,000 100% $200,000,000 $60,606
===========================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f).
----------------
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.
================================================================================
<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 JULY 16, 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."
If the Reorganization (as defined herein) is not consummated by September
15, 1997, the Company will be required to redeem the Exchange Notes at 101% of
their principal amount, plus accrued interest. The Reorganization will occur
as soon as practicable after receipt of certain regulatory approvals and
certain other consents described herein. Prior to the earlier of the
consummation of the Reorganization or the redemption of the Exchange Notes,
the net proceeds from the Offering (as defined herein) will be held by the
Trustee and invested in U.S. government securities and commercial paper. Upon
the consummation of the Reorganization, a portion of the proceeds held by the
Trustee will be used to purchase a portfolio of U.S. government securities
that will be pledged as security for 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 Transactions (as defined herein), as of March 31,
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 Exchange Notes will be effectively subordinated to all
existing and future liabilities (including trade payables) of the Company's
subsidiaries. On March 31, 1997, on the same pro forma basis, the Company's
subsidiaries would have had approximately $33.7 million of liabilities
(excluding intercompany payables), including approximately $14.6 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
2
<PAGE>
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 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>
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PAGE
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<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.......................... 57
</TABLE>
<TABLE>
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PAGE
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<S> <C>
Management........................ 71
Certain Transactions.............. 75
Principal Stockholders............ 77
Description of Certain
Indebtedness..................... 78
Description of the Exchange Notes. 81
Plan of Distribution.............. 109
Legal Matters..................... 109
Experts........................... 110
Available Information............. 110
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. The Reorganization and the Offering
are collectively referred to herein as the "Transactions." 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, "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 and earnings
before interest expense, income taxes, depreciation and amortization ("EBITDA")
of approximately $19.2 million (excluding an estimated $3.4 million of interest
income from the securities to be pledged to secure the Senior Notes and the
Exchange Notes). For the three months ended March 31, 1997, the Company had pro
forma revenues of approximately $26.3 million and EBITDA of approximately $6.0
million (excluding an estimated $.9 million of interest income from the
securities pledged to secure the Senior Notes and the Exchange Notes).
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 5,000 route miles, of which approximately 2,100 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 1,200 route miles to its fiber network by the end
of 1997 through construction or long-term dark fiber leases. In 1996, the
Company's Carriers' Carrier Services business generated pro forma revenues of
approximately $20.2 million and EBITDA of $11.7 million. For the three months
ended March 31, 1997, the Company's Carriers' Carrier Services business
generated pro forma revenues of approximately $6.8 million and EBITDA of
approximately $3.9 million. As of March 31, 1997, on a pro forma basis, the
Company had remaining future long-term contract commitments totaling
approximately $83.7 million, of which $61.4 million are expected to be realized
through 2001.
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 March
31, 1997, the Company provided services to over 6,000 business customers. The
Company currently offers Retail Services, other than local exchange services,
in 12 metropolitan areas in
4
<PAGE>
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 Company's Retail
Services business generated pro forma revenues of approximately $65.2 million
and EBITDA of approximately $7.5 million. For the three months ended March 31,
1997, the Company's Retail Services business generated pro forma revenues of
approximately $19.5 million and EBITDA of approximately $2.1 million.
The Company expects to begin offering local exchange services as part of its
Retail Services in six to nine markets during the second half of 1997 by
reselling the services of incumbent local exchange carriers and 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 Corporation ("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 access to 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.
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 in the
southern United States of Retail Services. 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:
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, beginning 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 incumbent local exchange
carriers' or other competitive local exchange carriers' unbundled facilities.
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
5
<PAGE>
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 13 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 2,100 route miles of fiber
optic network extending from Georgia to Texas, with an additional 1,200 owned
and operated route miles expected to be added by the end of 1997. 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
Company, Inc. ("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.
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.
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. Also in August 1994, ITC Holding and SCANA
6
<PAGE>
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 the Internet business of
Viper Computer Systems, Inc. ("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 has been 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
Transmission, 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 a credit facility (the "Bridge Facility") with
NationsBank, N.A., an affiliate of NationsBanc Capital Markets, Inc., one of
the Placement Agents, to refinance a project loan incurred by Gulf States
FiberNet. In connection with the Reorganization, approximately $31.0 million of
the $74.0 million of the DeltaCom Indebtedness will be forgiven by ITC Holding
and contributed to the Company as additional equity. Upon consummation of the
Reorganization, the Company intends to use a portion of the net proceeds from
the Offering to repay the remaining $43.0 million of the DeltaCom Indebtedness,
accrued interest on all $74.0 million of such indebtedness, the $41.6 million
of indebtedness outstanding under the Bridge Facility and accrued interest
thereon. See "Use of Proceeds."
Upon receipt of certain regulatory approvals and certain other consents, ITC
Holding will contribute to the Company the businesses of Interstate FiberNet,
Gulf States FiberNet, DeltaCom and InterQuest (such transactions collectively
referred to herein as the "Reorganization"). See "History of the Company--
Reorganization."
7
<PAGE>
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 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
8
<PAGE>
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 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
9
<PAGE>
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.
Upon the consummation of the Reorganization, the
net proceeds from the Offering 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. Until the Reorganization is consummated and
the net proceeds from the Offering are released to
the Company, ITC Holding will continue to advance
funds to the Company to cover, on an interim basis,
certain capital expenditures related to the
Company's expansion of its fiber optic network and
switching equipment. Such advanced funds will not
accrue interest and will be repaid with a portion
of the proceeds from the Offering. 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.
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, the net proceeds from
the Offering were used to purchase securities
consisting of U.S. government securities and
commercial paper ("Pledged Securities") on June 3,
1997, the date of the initial sale of the Senior
Notes (the "Closing Date"). The Pledged Securities
are currently being held by the Trustee to secure
10
<PAGE>
the Senior Notes and the Exchange Notes until the
Company consummates (i) the Reorganization or (ii)
the Special Mandatory Redemption. See "--Special
Mandatory Redemption" below. In the event the
Reorganization is consummated and certain other
conditions are satisfied prior to September 15,
1997, a portion of the proceeds held by the Trustee
will be used to purchase a portfolio of Pledged
Securities (consisting only of U.S. government
securities) that will continue to be held as
security for the payment of the first six scheduled
interest payments due on the Senior Notes and the
Exchange Notes. The amount of U.S. government
securities to be purchased will depend on interest
rates prevailing on the date the U.S. government
securities are purchased. 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 Exchange Notes are made,
the Exchange Notes will be unsecured. See
"Description of the Exchange Notes--Special
Mandatory Redemption" and "--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.
Special Mandatory
Redemption............... The Exchange Notes will be subject to mandatory
redemption at 101% of their principal amount, plus
accrued interest, in the event that the
Reorganization is not consummated and certain other
conditions are not satisfied by September 15, 1997
or if it appears, in the sole judgment of the
Company, that the Reorganization will not be
consummated or such conditions will not be
satisfied by such date. The Reorganization will be
completed as soon as practicable after the Company
receives certain regulatory approvals and other
consents. See "Business--Regulation--Regulatory
Approvals Required for the Reorganization." Prior
to the earlier of (i) the date on which the
Reorganization is consummated and certain other
conditions are satisfied and (ii) the date on which
the Exchange Notes are mandatorily redeemed, the
net proceeds from the Offering will be held by the
Trustee. See "--Security" above.
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.
11
<PAGE>
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."
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
Transactions, at March 31, 1997, the Company (on an
unconsolidated basis) would have had no other
indebtedness other than the Senior Notes and the
Exchange Notes. In addition, after the
Reorganization the Exchange Notes will be unsecured
(except as described under "--Security") and will
be effectively subordinated to all secured
indebtedness. The Company is a holding company and
the Exchange Notes will be effectively subordinated
to all existing and future liabilities (including
trade payables) of the Company's subsidiaries. On
March 31, 1997, on the same pro forma basis, the
subsidiaries of the Company would have had
approximately $33.7 million of liabilities
(excluding intercompany payables), including
approximately $14.6 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 proceeds therefrom. The pro forma statement of operations data
for the three months ended March 31, 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
proceeds therefrom. The pro forma balance sheet data at March 31, 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 Offering and the use of proceeds
therefrom, as if each of such transactions had occurred on March 31, 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, THREE MONTHS ENDED MARCH 31,
---------------------------------------------------- ---------------------------------------
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 $11,287,759 $ 25,422,578 $ 26,308,028
Operating expenses:
Cost of service...... 2,484,744 3,149,231 38,756,287 42,587,228 6,414,619 12,197,321 12,197,321
Selling, operations
and
administration expense.. 948,230 1,626,678 18,876,572 23,866,169 3,016,615 7,888,844 8,137,069
Depreciation and am-
ortization.......... 738,052 1,267,882 6,438,074 14,612,761 1,196,422 3,842,689 4,203,498
----------- ----------- ------------ ------------ ----------- ------------ ------------
Total operating ex-
penses.............. 4,171,026 6,043,791 64,070,933 81,066,158 10,627,656 23,928,854 24,537,888
Operating income
(loss)............... 774,876 (293,204) 2,447,652 4,308,204 660,103 1,493,724 1,770,140
Equity in losses of
unconsolidated
subsidiaries......... (96,920) (258,242) (1,589,812) -- (594,763) -- --
Interest expense...... (273,759) (297,228) (6,172,421) (26,266,789) (1,118,874) (2,648,742) (6,315,083)
Interest and other in-
come................. 82,348 41,734 171,514 3,791,211 33,033 24,497 959,267
----------- ----------- ------------ ------------ ----------- ------------ ------------
Income (loss) before
taxes,
preacquisition (earnings)
losses and extraordi-
nary item............ 486,545 (806,940) (5,143,067) (18,167,374) (1,020,501) (1,130,521) (3,585,676)
Income tax (provision)
benefit.............. (113,248) 302,567 1,233,318 6,139,382 301,133 264,471 1,225,600
Preacquisition (earn-
ings) losses......... (236,300) -- -- -- -- 74,132 --
Extraordinary item
(net of tax
benefit)............. -- -- -- -- -- (507,515) (507,515)
----------- ----------- ------------ ------------ ----------- ------------ ------------
Net income (loss)..... $ 136,997 $ (504,373) $ (3,909,749) $(12,027,992) $ (719,368) $ (1,299,433) $ (2,867,591)
=========== =========== ============ ============ =========== ============ ============
BALANCE SHEET DATA (AT PERIOD
END):
Working capital (defi-
cit)................. $ 254,988 $ (242,136) $ 3,415,088 $(43,507,804) $ 44,318,173
Property and equip-
ment, net............ 8,486,996 9,386,444 31,880,556 109,892,551 109,892,551
Total assets.......... 20,062,286 20,922,337 113,207,979 192,450,427 299,947,493
Long-term debt,
advances from ITC
Holding and capital
lease obligations,
including current
portions............. 4,013,977 3,143,977 75,442,971 130,651,968 214,576,045
Stockholder's equity.. 13,761,409 14,307,036 19,256,526 35,279,158 66,273,058
OTHER FINANCIAL DATA:
Capital expenditures.. $ 3,703,835 $ 1,805,742 $ 6,172,660 $ 7,427,263 $ 974,012 $ 4,250,082 $ 4,250,082
EBITDA(f)............. 1,262,056 758,170 7,467,428 22,712,176 1,294,795 5,435,042 6,932,905
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 three months ended March 31, 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 will be
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, interest expense,
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
three months ended March 31, 1997 includes an estimated $3.4 million and
$.9 million, respectively, of interest income that would have been earned
on the estimated $61.5 million required to be placed in a pledged account
and 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 three months ended March 31, 1996, 1997 and pro forma 1997 by $.8
million, $5.1 million, $18.2 million, $1.0 million, $1.1 million and $3.6
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. The
Company does not expect to obtain a significant market share for its Retail
Services 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 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 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 March 31, 1997, on a pro forma basis, giving effect to the Transactions,
the Company would have had $214.6 million of indebtedness and its
stockholder's equity would have been $66.3 million. On a pro forma basis,
15
<PAGE>
giving effect to the Transactions, the Company's earnings would have been
insufficient to cover its fixed charges for the year ended December 31, 1996
and the three months ended March 31, 1997 by $18.2 million and $3.6 million,
respectively, and its EBITDA less capital expenditures and interest expense
would have been negative $11.0 million and negative $4.5 million,
respectively.
The Indenture contains and the Credit Facility will contain restrictions on
the Company and its subsidiaries that will affect, and in certain cases will
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 adequately identify 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, are considered favorable to
new competitive entrants, but those rules have not been fully implemented. The
FCC's rules have been 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, to be in effect until the Court issues a decision on the merits
of the FCC's rules. The Court ordered an expedited briefing schedule and a
final ruling is expected soon. The Court stayed implementation of the pricing
provisions of the FCC's rules and the rules that enable new entrants to "pick
and choose" elements of established interconnection agreements. The Court's
stay does not affect the implementation of the FCC's other interconnection
rules and does not affect the statutory requirements of the Telecommunications
Act, including the statutory requirements that incumbent local exchange
carriers conduct negotiations and enter into interconnection agreements with
competitive carriers. Although the Company believes that the
Telecommunications Act and other state and federal regulatory initiatives that
favor increased competition are advantageous to the Company, there can be no
assurance that changes in current or future state or federal regulations,
including changes that may result from court review of the FCC's
interconnection rules, or increased competitive opportunities resulting from
such changes, will not have a material adverse effect on the Company.
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
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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 are
building nationwide networks and some compete in various 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 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 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,
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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.
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 those access charges
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."
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
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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. The
Interconnection Agreement does not provide for all material terms for the
resale of local services or access to the unbundled network elements. Some of
such terms may be affected by pending legal proceedings regarding FCC
regulatory requirements, the outcome of which will apply to the industry as a
whole. Although there can be no assurance, the Company expects that the
Interconnection Agreement will provide a foundation for it to provide local
service on a reasonable commercial basis. 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. 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 service to the customers
served on that basis. See "Business--Regulation."
DEPENDENCE ON CERTAIN CUSTOMERS
For the year ended December 31, 1996 and the three months ended March 31,
1997, giving effect to the Reorganization, the Company's two largest Carriers'
Carrier customers would have accounted for approximately 15% and 9%,
respectively, of the Company's combined pro forma revenues. For the three
months endedMarch 31, 1997, the Company's five largest Retail Services
customers would have represented an aggregate of approximately 9.9% 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 March 31,
1997, on a pro forma basis, the Company's Carriers' Carrier business had
remaining future long-term contract commitments totaling approximately $83.7
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.
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. The Company has a buy-sell agreement with Carolinas Fibernet, LLC,
which
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manages fiber optic facilities in North Carolina and South Carolina. 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." 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 March 31, 1997, on a pro forma basis, giving effect to the Transactions,
the subsidiaries of the Company had approximately $33.7 million of liabilities
(excluding intercompany payables), including approximately $14.6 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.
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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 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.
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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.
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,
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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.
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
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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.
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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 will acquire these
businesses upon consummation of the Reorganization, which will occur following
receipt of certain regulatory approvals and satisfaction of other conditions.
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.
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 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 has been 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 was assumed by Transmission, 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.
REORGANIZATION
In the Reorganization, ITC Holding will contribute to the Company the
businesses of Interstate FiberNet, Gulf States FiberNet, DeltaCom and
InterQuest.
In connection with the Reorganization, approximately $31.0 million of the
DeltaCom Indebtedness will be forgiven by ITC Holding and contributed to the
Company as additional equity. Upon the release of the net proceeds from the
Offering when the Reorganization is consummated, the Company intends to repay
the remaining $43.0 million of the DeltaCom Indebtedness, accrued interest on
all $74.0 million of such indebtedness, the $41.6 million of indebtedness
outstanding under the Bridge Facility and accrued interest thereon. See "Use
of Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
34
<PAGE>
The consummation of the Reorganization and the release of the net proceeds
from the Offering are subject to the satisfaction of certain conditions,
including the receipt of certain regulatory approvals and consents, the
receipt of consents from certain other parties and the release of the
companies that will become subsidiaries of the Company in the Reorganization
from their obligations under, and the pledge of their assets to secure, ITC
Holding's credit facility. See "Business--Regulation--Regulatory Approvals
Required for the Reorganization," "Description of the Exchange Notes--
Security" and "--Special Mandatory Redemption."
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 Senior Notes surrendered in exchange for Exchange
Notes will be retired and canceled and cannot be reissued.
The net proceeds to the Company from the Offering were approximately $192.7
million, after deducting the estimated underwriting discounts and commissions
and other expenses payable by the Company. After the Reorganization occurs, an
estimated $61.5 million will continue to be held by the Trustee as security
for and to fund the first six interest payments on the Senior Notes and the
Exchange Notes. The Company intends to use the remaining net proceeds from the
Offering as follows: (i) to repay outstanding indebtedness of the Company of
approximately $85.1 million, together with accrued interest thereon, (ii) 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 (iii) 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 Company currently intends to allocate substantial
proceeds to each of the foregoing uses. Except for repayment of outstanding
indebtedness as indicated, however, the precise allocation of funds among
these uses will depend on future technological, regulatory and other
developments in or affecting the Company's business, the competitive climate
in which it operates and the emergence of future opportunities.
The indebtedness to be repaid from the net proceeds consists of (i) $43.0
million of the DeltaCom Indebtedness (plus accrued interest on all $74.0
million of the DeltaCom Indebtedness, which was approximately $8.5 million at
May 31, 1997), which bears interest at an annual rate of 8.595% and matures on
January 19, 1998, (ii) $41.6 million of indebtedness (plus accrued interest,
which was approximately $.8 million at May 31, 1997) under the Bridge
Facility, which bears interest at floating rates (30-day LIBOR plus 2.25%) and
matures on the earlier of the date the Offering proceeds are released by the
Trustee or December 31, 1997, and (iii) as of May 31, 1997, $6.0 million
advanced by ITC Holding for general corporate purposes. Prior to the release
of the Offering proceeds to the Company, ITC Holding will continue to advance
funds to the Company to cover, on an interim basis, certain capital
expenditures related to the Company's expansion of its fiber optic network and
switching equipment. Such advanced funds will not accrue interest and will be
repaid with a portion of the proceeds from the Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview" and "--Liquidity and Capital Resources."
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."
35
<PAGE>
The Exchange Notes will be subject to mandatory redemption, on not less than
30 nor more than 60 days' notice, at 101% of their principal amount plus
accrued interest, in the event that the Reorganization is not consummated and
certain other conditions are not satisfied by September 15, 1997 or if it
appears, in the sole judgment of the Company, that the Reorganization will not
be consummated by such date. Prior to the earlier of (i) the date on which the
Reorganization is consummated and such other conditions are satisfied or (ii)
the date on which the Exchange Notes are mandatorily redeemed, the net
proceeds from the Offering will be held by the Trustee and invested in Pledged
Securities. See "Description of the Exchange Notes--Special Mandatory
Redemption."
CAPITALIZATION
The following table sets forth, as of March 31, 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 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>
MARCH 31, 1997
------------------------------------------------
ADJUSTMENTS
FOR THE PRO FORMA
HISTORICAL REORGANIZATION CONSOLIDATED
COMBINED AND OFFERING AS ADJUSTED
------------ -------------- ------------
<S> <C> <C> <C>
Advances from ITC Holding..... $ 74,475,923 $(74,475,923) $ --
------------ ------------ ------------
Long-term debt and capital
lease obligations:
Capital lease obligations,
including current portion
of $500,910................ 3,689,280 -- 3,689,280
Notes offered hereby........ -- 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 $282,562........ 922,674 -- 922,674
------------ ------------ ------------
Total long-term debt and
capital lease obligations,
including current portion
(a)....................... $ 56,176,045 $158,400,000 $214,576,045
------------ ------------ ------------
Total stockholder's equity
(b).......................... 35,279,158 30,993,900 66,273,058
------------ ------------ ------------
Total capitalization.......... $165,931,126 $114,917,977 $280,849,103
============ ============ ============
</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)
$150,000 of equity contributed to the Company upon its formation to be
consolidated in the Reorganization, (ii) ITC Holding's forgiveness and
contribution of $30,999,900 of the DeltaCom Indebtedness to the Company in
connection with the Reorganization, and (iii) the write-off of $156,000 of
debt issuance costs related to the Bridge Facility to be 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 three months ended March 31, 1996 and 1997 have been
derived from the Company's unaudited combined financial statements but, in the
opinion of management, reflect 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>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------------- -------------------------
(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 $11,287,759 $ 25,422,578
Operating expenses:
Cost of service........ -- 578,206 2,484,744 3,149,231 38,756,287 6,414,619 12,197,321
Selling, operations
and administration
expense............... -- 235,627 948,230 1,626,678 18,876,572 3,016,615 7,888,844
Depreciation and
amortization.......... -- 47,068 738,052 1,267,882 6,438,074 1,196,422 3,842,689
---------- ---------- ----------- ----------- ------------ ----------- ------------
Total operating
expenses............ -- 860,901 4,171,026 6,043,791 64,070,933 10,627,656 23,928,854
Operating income
(loss)................. -- (223,988) 774,876 (293,204) 2,447,652 660,103 1,493,724
Equity in losses of
unconsolidated
subsidiaries........... (25,819) 360,257 (96,920) (258,242) (1,589,812) (594,763) --
Interest expense........ -- -- (273,759) (297,228) (6,172,421) (1,118,874) (2,648,742)
Interest and other
income
(other expense)........ -- (826) 82,348 41,734 171,514 33,033 24,497
---------- ---------- ----------- ----------- ------------ ----------- ------------
Income (loss) before
taxes, preacquisition
earnings (losses) and
extraordinary item..... (25,819) 135,443 486,545 (806,940) (5,143,067) (1,020,501) (1,130,521)
Income tax (provision)
benefit................ 15,672 (54,582) (113,248) 302,567 1,233,318 301,133 264,471
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) $ (719,368) $ (1,299,433)
========== ========== =========== =========== ============ =========== ============
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
(deficit).............. $ -- $ 382,562 $ 254,988 $ (242,136) $ 3,415,088 $(43,507,804)
Property and equipment,
net.................... -- 5,204,153 8,486,996 9,386,444 31,880,556 109,892,551
Total assets............ 2,118,761 6,294,266 20,062,286 20,922,337 113,207,979 192,450,427
Long-term debt, advances
from ITC Holding, and
capital lease
obligations, including
current portions....... -- 797,288 4,013,977 3,143,977 75,442,971 130,651,968
Stockholder's equity.... 2,105,681 4,737,090 13,761,409 14,307,036 19,256,526 35,279,158
OTHER FINANCIAL DATA:
Capital expenditures.... $ -- $ 531,187 $ 3,703,835 $ 1,805,742 $ 6,172,660 $ 974,012 $ 4,250,082
EBITDA(g)............... (25,819) 182,511 1,262,056 758,170 7,467,428 1,294,795 5,435,042
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 three months ended March 31, 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 will be
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, interest expense,
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 three
months ended March 31, 1996 and 1997 by $.8 million, $5.1 million, $1.0
million and $1.1 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: Transmission, ITC
Transmission Systems II, Inc. ("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 three months ended March 31, 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 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 Offering and the use of proceeds
therefrom, as if each of such transactions had occurred on March 31, 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 -- 3,461,512 (e) 3,791,211
----------- ---------- ----------- ---------- ------------ ------------
Total other income
(expense)............. (7,590,719) (131,549) (4,199,150) -- (10,554,160) (22,475,578)
Income (loss) before
taxes.................. (5,143,067) 528,012 (4,416,142) 1,618,654 (10,754,831) (18,167,374)
Income tax
(provision) benefit.... 1,233,318 (200,645) -- (615,000) 5,721,709 (f) 6,139,382
----------- ---------- ----------- ---------- ------------ ------------
Net income (loss)....... $(3,909,749) $ 327,367 $(4,416,142) $1,003,654 $ (5,033,122) $(12,027,992)
=========== ========== =========== ========== ============ ============
</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.
(d) 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 Transmission; (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, $81.6 million
of which will be repaid with a portion of the proceeds from the Offering
and approximately $31.0 million of which will be 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 will be repaid
with a portion of the proceeds from the Offering.
(e) Reflects the estimated interest income that would have been earned on the
estimated $61,498,000 of Offering proceeds required to be 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 (assuming a 6.08% interest rate). Under the terms
of the Indenture, the amounts placed in the pledged account are required
to be invested in Pledged Securities, which will 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 THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
GEORGIA
HISTORICAL FIBER PRO FORMA PRO FORMA
COMBINED ASSETS ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues........ $25,422,578 $885,450 $ -- $26,308,028
Cost of services.......... 12,197,321 -- -- 12,197,321
----------- -------- ----------- -----------
Gross margin.............. 13,225,257 885,450 -- 14,110,707
Operating Expenses:
Selling, operations, and
administrative.......... 7,888,844 248,225 -- 8,137,069
Depreciation & amortiza-
tion.................... 3,842,689 334,034 26,775 (a) 4,203,498
----------- -------- ----------- -----------
Total operating ex-
penses.................. 11,731,533 582,259 26,775 12,340,567
Operating income.......... 1,493,724 303,191 (26,775) 1,770,140
Other income (expense):
Interest expense......... (2,648,742) -- (3,666,341)(b) (6,315,083)
Interest and other income
(expense)............... 24,497 -- 934,770 (c) 959,267
----------- -------- ----------- -----------
Total other income (ex-
pense).................. (2,624,245) -- (2,731,571) (5,355,816)
Income before taxes,
preacquisition losses and
extraordinary item....... (1,130,521) 303,191 (2,758,346) (3,585,676)
Income tax (provision)
benefit ................. 264,471 (115,213) 1,076,342 (d) 1,225,600
----------- -------- ----------- -----------
Income (loss) before
preacquisition losses and
extraordinary item....... (866,050) 187,978 (1,682,004) (2,360,076)
Preacquisition losses..... 74,132 -- (74,132) --
Extraordinary item (net of
tax benefit)............. (507,515) -- -- (507,515)
----------- -------- ----------- -----------
Net income (loss)......... $(1,299,433) $187,978 $(1,756,136) $(2,867,591)
=========== ======== =========== ===========
</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 Transmission; (ii) interest expense of
$5,500,000 related to the Notes; (iii) the amortization of $183,750 of
debt issuance costs relating to the Offering; (iv) the elimination of
$2,447,422 of interest expense related to the DeltaCom Indebtedness and
the Gulf States FiberNet debt, $81.6 million of which will be repaid with
a portion of the proceeds from the Offering and approximately $31.0
million of which will be forgiven by ITC Holding and contributed to equity
in connection with the Reorganization; and (v) the write-off of $156,000
of debt issuance costs related to the Bridge Facility, which will be
repaid with a portion of the proceeds from the Offering.
(c) Reflects the estimated interest income that would have been earned on the
estimated $61,498,000 of Offering proceeds required to be 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 (assuming an interest rate of 6.08% per annum).
Under the terms of the Indenture, the amounts placed in the pledged
account are required to be invested in Pledged Securities, which will
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.
41
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL FOR THE OFFERING PRO FORMA CONSOLIDATED
COMBINED AND REORGANIZATION ELIMINATIONS BALANCE SHEET
------------ ------------------ ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............. $ 1,447,289 $38,805,066 (a) $ -- $ 40,252,355
Restricted cash......... -- 22,500,000 (b) -- 22,500,000
Accounts receivable, net
of allowance for
uncollectible accounts.. 16,235,153 -- -- 16,235,153
Other current assets.... 5,057,930 -- -- 5,057,930
Restricted cash......... -- 38,998,000 (b) -- 38,998,000
Investments............. -- 35,279,158 (c) (35,279,158)(d) --
Intangible assets, net.. 59,259,973 -- -- 59,259,973
Property, plant, and
equipment, net.......... 109,892,551 -- -- 109,892,551
Other long-term assets.. 557,531 7,194,000 (e) -- 7,751,531
------------ ------------ ------------ ------------
Total assets........... $192,450,427 $142,776,224 $(35,279,158) $299,947,493
============ ============ ============ ============
LIABILITIES AND
STOCKHOLDER'S EQUITY
Accounts payable........ $ 8,763,597 $ -- $ -- $ 8,763,597
Accrued interest expense
payable to ITC Holding.. 7,420,911 (7,420,911)(a) -- --
Other accrued
liabilities............. 5,687,378 -- -- 5,687,378
Current portion of long-
term debt and capital
lease obligations....... 44,376,290 (41,600,000)(a) -- 2,776,290
Advances from ITC
Holding................. 74,475,923 (74,475,923)(a)(c) -- --
Long-term debt and
capital lease
obligations............. 11,799,755 200,000,000 (f) -- 211,799,755
Deferred income taxes... 4,647,415 -- -- 4,647,415
Common stock............ 826 150,000 (a) (826)(d) 150,000
Additional paid-in
capital................. 40,814,227 66,279,058 (c) (40,814,227)(d) 66,279,058
Accumulated deficit..... (5,535,895) (156,000)(g) 5,535,895 (d) (156,000)
------------ ------------ ------------ ------------
Total liabilities and
stockholder's equity... $192,450,427 $142,776,224 $(35,279,158) $299,947,493
============ ============ ============ ============
</TABLE>
- ----
(a) Reflects the $150,000 of equity received from ITC Holding upon the
formation of the Company and consolidated upon the Reorganization and the
estimated $192,650,000 net proceeds from the Offering less: (i) the
estimated $61,498,000 to be placed in a pledged account (see (b) below);
(ii) the repayment of $43,476,023 of advances from ITC Holding (the
DeltaCom Indebtedness) and related interest of $7,420,911; and (iii) the
repayment of indebtedness under the Bridge Facility of $41,600,000.
(b) Reflects the estimated $61,498,000 of the proceeds from the Offering to be
placed in a pledged account to secure and fund the first six scheduled
interest payments on the Senior Notes and the Exchange Notes.
(c) 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.
(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.
(e) Reflects the estimated debt issuance costs of the Offering of $7,350,000,
partially offset by the write-off of debt issuance costs of $156,000
related to the Bridge Facility.
(f) Reflects the issuance of the Senior Notes and the Exchange Notes.
(g) Reflects the expense associated with the write-off of debt issuance costs
of $156,000 related to the Bridge Facility.
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<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 interest expense, 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 the 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 has been 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 Transmission, 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 Certain 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.
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In connection with the Reorganization, approximately $31.0 million of the
DeltaCom Indebtedness will be forgiven by ITC Holding and contributed to the
Company as additional equity. Upon the release of the net proceeds from the
Offering when the Reorganization is consummated, the Company intends to repay
the remaining $43.0 million of the DeltaCom Indebtedness, accrued interest on
all $74.0 million of such indebtedness, 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 of March 31, 1997,
the Company provided Retail Services to over 6,000 business customers and
approximately 7,000 residential customers. Such residential customers
represented less than 5% of the Company's revenues for the year ended 1996 and
the three months ended March 31, 1997.
The Company expects to begin offering local exchange services as part of its
Retail Services in six to nine markets during the second half of 1997 by
reselling the services of incumbent local exchange carriers and 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 access to 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.
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.
Certain states have accepted this view, but the FCC has rejected it.
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 5,000
route miles, approximately 2,100 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 1,200 owned and operated route miles to
its fiber network by the end of 1997 through construction or long-term dark
fiber leases. To the extent that the
44
<PAGE>
Company elects to expand its network through long-term leases in lieu of
construction, the Company expects such leases to have a negative effect on
EBITDA; however, the Company expects any such expansion of its network would
provide opportunities to generate additional revenues.
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 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 three months ended
March 31, 1997, the Company's commission revenues from these arrangements
amounted to approximately $124,000. 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 March 31, 1997, on a pro forma basis, the Company had
remaining future long-term contract commitments totaling approximately $83.7
million. These contracts expire on various dates through 2006 and are expected
to generate approximately $61.4 million in revenues to the Company through
2001. The Company's two largest Carriers' Carrier Services customers are
national common carriers, which represented an aggregate of approximately 15%
and 9% of combined pro forma revenues for 1996 and the three months ended
March 31, 1997, respectively. No single Carriers' Carrier customer or Retail
Services customer represented over 10% of the Company's combined pro forma
revenues for such periods.
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 fill
additional requirements of a contract which are otherwise substantially met on
the Company's network or to meet contract requirements in cases where the
Company plans to construct its own network to replace the off-net portion.
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
45
<PAGE>
equipment and amortization of goodwill and other intangible assets related to
acquisitions, primarily the DeltaCom Acquisition.
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.
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 three months
ended March 31, 1996 and 1997. The 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 January 1, 1994,
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 January 1, 1994.
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 date, 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.
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------------- -----------------------------------------
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% $15,291,778 79% $19,538,523 74%
Carriers' Carrier
Services......... 8,582,444 14% 16,837,906 23% 20,197,555 24% 3,968,293 21% 6,769,505 26%
----------- ----------- ----------- ----------- -----------
Total........... $62,360,009 $73,108,917 $85,374,362 $19,260,071 $26,308,028
=========== =========== =========== =========== ===========
Gross Margin
Retail Services... $20,608,785 38% $23,915,653 43% $25,820,210 40% $ 6,387,287 42% $ 8,245,275 42%
Carriers' Carrier
Services......... 5,728,170 67% 12,649,817 75% 16,966,924 84% 3,427,050 86% 5,865,432 87%
----------- ----------- ----------- ----------- -----------
Total........... $26,336,955 42% $36,565,470 50% $42,787,134 50% $ 9,814,337 51% $14,110,707 54%
=========== =========== =========== =========== ===========
EBITDA
Retail Services... $10,056,261 19% $10,175,263 18% $ 7,551,892 12% $ 2,522,415 16% $ 2,097,262 11%
Carriers' Carrier
Services......... 4,286,630 50% 9,012,984 54% 11,698,772 58% 2,066,367 52% 3,900,873 58%
----------- ----------- ----------- ----------- -----------
Total(a)........ $14,342,891 23% $19,188,247 26% $19,250,664 23% $ 4,588,782 24% $ 5,998,135 23%
=========== =========== =========== =========== ===========
</TABLE>
- --------
(a) Excludes the estimated $3,400,000 of interest income for the year ended
December 31, 1996 and $900,000 of interest income for the three months
ended March 31, 1997 that would have been earned on the estimated
$61,500,000 of Offering proceeds required to be placed in a pledged
account and invested in Pledged Securities.
46
<PAGE>
PRO FORMA THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO PRO FORMA THREE MONTHS
ENDED MARCH 31, 1997
Revenues
Pro forma revenues increased 37% from $19.3 million for the three months
ended March 31, 1996 to $26.3 million for the three months ended March 31,
1997. Of this increase, $4.2 million was attributable to Retail Services,
which increased $3.1 million from long distance services and $1.1 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, partially offset by a decrease in revenues per minute
(because of lower prices). Carriers' Carrier Services accounted for $2.8
million of the total revenues increase. Total revenues attributable to
Carriers' Carrier Services increased 71% from $4.0 million for the three
months ended March 31, 1996 to $6.8 million for the three months ended March
31, 1997, due to increased demand from new and existing customers.
Gross Margin
Pro forma gross margin increased from $9.8 million for the three months
ended March 31, 1996 to $14.1 million for the three months ended March 31,
1997. Pro forma gross margin for Carriers' Carrier Services as a percentage of
revenues increased slightly, from 86% for the three months ended March 31,
1996 to 87% for the three months ended March 31, 1997, primarily due to
additional revenues. For Retail Services, pro forma gross margin as a
percentage of revenues was 42% for the three months ended March 31, 1996 and
1997. 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, although increased
competition (particularly with respect to pricing) in the long distance market
is likely to adversely affect the Company's gross margin on such services as a
percentage of revenues. 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 resale, the Company expects gross margin on local service to
improve.
EBITDA
Pro forma EBITDA (excluding an estimated $900,000 of interest income from
the Pledged Securities) increased $1.4 million from $4.6 million for the three
months ended March 31, 1996 to $6.0 million for the three months ended March
31, 1997, an increase of 31%. For Carriers' Carrier Services, pro forma EBITDA
increased as a percentage of revenues from 52% for the three months ended
March 31, 1996 to 58% for the three months ended March 31, 1997, primarily due
to increased revenues. Pro forma EBITDA related to Retail Services decreased
$400,000, from $2.5 million for the three months ended March 31, 1996 to $2.1
million for the three months ended March 31, 1997. This decrease was
attributable to the costs associated with the new sales offices opened since
March 31, 1996 and 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
prepares to offer local service and open additional sales offices.
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
47
<PAGE>
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 $36.6 million in 1995 to $42.8 million
in 1996. For Carriers' Carrier Services, pro forma gross margin as a
percentage of revenues increased from 75% 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 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 (excluding an estimated $3.4 million of interest income
from the Pledged Securities) remained stable at $19.2 million in 1995 and
1996. Pro forma EBITDA related to Retail Services decreased $2.6 million from
$10.2 million in 1995 to $7.6 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. Excluding the effect of the $3.3 million
nonrecurring payment in 1995 related to the initial construction of the Gulf
States FiberNet fiber optic route, EBITDA relating to Carriers' Carrier
Services increased $5.9 million from $5.8 million in 1995 to $11.7 million in
1996 on a $6.7 million increase in revenues, because the long-haul portion of
the Carriers' Carrier business has low associated variable costs.
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 $700,000 attributable to sales of customer premise
equipment. Revenues from Carriers' Carrier Services contributed $8.2 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
$800,000 was attributable to increased sales on existing network routes and
the sale of newly introduced SS7 Services.
48
<PAGE>
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 $14.3 million in 1994 to $19.2 million
in 1995. Pro forma EBITDA related to Retail Services increased slightly from
$10.1 million in 1994 to $10.2 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 $600,000 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 $4.3 million in 1994 to $9.0 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.
49
<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 three months ended March
31, 1996 and 1997 for the Carriers' Carrier Services business and for the year
ended December 31, 1996 and the three months ended March 31, 1996 and 1997,
for the Retail Services business.
<TABLE>
<CAPTION>
CARRIERS' CARRIER SERVICES
-------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------- -----------------------------------
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% $1,252,912 100% $5,884,055 100%
Cost of services........ 2,484,744 50% 3,149,231 55% 2,363,073 36% 473,511 38% 904,073 15%
---------- ---------- ---------- ---------- ----------
Gross margin........... 2,461,158 50% 2,601,356 45% 4,235,636 64% 779,401 62% 4,979,982 85%
Selling, operations and
administration
expense................ 948,230 19% 1,626,678 28% 1,826,420 28% 459,436 36% 1,724,415 30%
Depreciation and
amortization........... 738,052 15% 1,267,882 22% 1,656,685 25% 374,035 30% 2,355,550 40%
---------- ---------- ---------- ---------- ----------
Total operating
expenses.............. 1,686,282 34% 2,894,560 50% 3,483,105 53% 833,471 66% 4,079,965 70%
---------- ---------- ---------- ---------- ----------
Operating income
(loss)................. $ 774,876 16% $ (293,204) (5%) $ 752,531 11% $ (54,070) (4%) $ 900,017 15%
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
RETAIL SERVICES
--------------------------------------------------
YEAR ENDED
DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------- ---------------------------------
1996 % 1996 % 1997 %
----------- ---- ----------- ---- ----------- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues................... $59,919,876 100% $10,034,847 100% $19,538,523 100%
Cost of services........... 36,393,214 61% 5,941,108 59% 11,293,248 58%
----------- ----------- -----------
Gross margin.............. 23,526,662 39% 4,093,739 41% 8,245,275 42%
Selling, operations and
administration expense.... 17,050,152 28% 2,557,179 26% 6,164,429 31%
Depreciation and
amortization.............. 4,781,389 8% 822,387 8% 1,487,139 8%
----------- ----------- -----------
Total operating expenses.. 21,831,541 36% 3,379,566 34% 7,651,568 39%
----------- ----------- -----------
Operating income........... $ 1,695,121 3% $ 714,173 7% $ 593,707 3%
=========== =========== ===========
</TABLE>
HISTORICAL THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH HISTORICAL THREE
MONTHS ENDED MARCH 31, 1996
The comparability of the three-month periods ended March 31, 1996 and 1997
has been affected by the DeltaCom Acquisition and the Gulf States Acquisition.
The three months ended March 31, 1996 includes the results of operations for
DeltaCom since its acquisition on January 29, 1996. In addition, due to the
acquisition of the remaining 64% interest in Gulf States FiberNet on March 27,
1997, the three months ended March 31, 1997 reflects Gulf States FiberNet's
total revenues and expenses from January 1, 1997, with the preacquisition
losses attributable to SCANA from January 1, 1997 deducted to determine
combined net loss. For the three months ended March 31, 1996, the Company's
36% interest in Gulf States FiberNet's results of operations is reflected
using the equity method.
Revenues
Revenues increased from $11.3 million for the three months ended March 31,
1996 to $25.4 million for the three months ended March 31, 1997. Of the $14.1
million increase, $9.5 million was attributable to additional revenues
generated by Retail Services, which included only two months of DeltaCom
revenues in the three months ended March 31, 1996. Revenues from Carriers'
Carrier Services increased to $5.9 million for the three
50
<PAGE>
months ended March 31, 1997 from $1.3 million for the three months ended March
31, 1996. Of the $4.6 million increase, $3.9 million was attributable to
revenues generated during the three months ended March 31, 1997 by Gulf States
FiberNet. Excluding revenues attributable to Gulf States FiberNet during the
three months ended March 31, 1997, Carriers' Carrier Services revenues
increased $700,000 due to growth in SS7 Services, managed network services and
increased demand for Carriers' Carrier Services.
Cost of Services
Cost of services increased $5.8 million to $12.2 million for the three
months ended March 31, 1997 from $6.4 million for the three months ended March
31, 1996. Cost of services for Retail Services' operations for the three
months ended March 31, 1997 was $11.3 million compared to $5.9 million for the
three months ended March 31, 1996, which included only two months of
DeltaCom's cost of services. Cost of services attributable to Carriers'
Carrier Services increased $400,000 for the three months ended March 31, 1997
compared to the three months ended March 31, 1996, primarily as a result of
the acquisition of Gulf States FiberNet.
Selling, Operations and Administration Expense
Selling, operations and administration expense increased from $3.0 million
for the three months ended March 31, 1996 to $7.9 million for the three months
ended March 31, 1997. Selling, operations and administration expense
attributable to Retail Services increased $3.6 million to $6.2 million for the
three months ended March 31, 1997 from $2.6 million for the three months ended
March 31, 1996, primarily as a result of inclusion of only two months of
DeltaCom expenses for the three months ended March 31, 1996 and the continued
expansion of sales offices and employment of additional support personnel.
Selling, operations and administration expense attributable to Carriers's
Carrier Services increased $1.2 million to $1.7 million for the three months
ended March 31, 1997 from $500,000 for the three months ended March 31, 1996,
of which $900,000 was attributable to the acquisition of Gulf States FiberNet.
The remaining $300,000 of this increase was attributable to increased costs of
administrative personnel employed to support business expansion. The Company
expects that selling, operations and administration expense will increase
significantly as a percentage of revenues in 1997 and 1998 as a result of the
anticipated expansion of the Company's services and entry into new target
markets.
Depreciation and Amortization
Depreciation and amortization expense increased from $1.2 million for the
three months ended March 31, 1996 to $3.8 million for the three months ended
March 31, 1997. Retail services accounted for $700,000 of the increase, due
primarily to amortization of goodwill related to the DeltaCom Acquisition for
a full quarter in 1997 as compared with two months in 1996. Additional
depreciation and amortization for Carrier's Carrier Services operations was
due primarily to the acquisition of Gulf States FiberNet.
Interest Expense and Extraordinary Item
Interest expense increased from $1.1 million for the three months ended
March 31, 1996 to $2.6 million for the three months ended March 31, 1997. Of
this $1.5 million increase, $500,000 was attributable to the DeltaCom
Indebtedness and $1.0 million was attributable to the acquisition of Gulf
States FiberNet. Additionally, $800,000 ($500,000 net of tax benefits) has
been recorded as an extraordinary loss. Such amount was related to the write-
off of debt issuance costs on Gulf States FiberNet's debt which was refinanced
with the Bridge Facility.
EBITDA
EBITDA increased from $1.3 million for the three months ended March 31, 1996
to $5.4 million for the three months ended March 31, 1997. Gulf States
FiberNet's operations accounted for $3.5 million of the increase. EBITDA
attributable to Retail Services for the three months ended March 31, 1996 was
$1.6 million, compared to $2.1 million for the three months ended March 31,
1997. EBITDA attributable to Retail Services decreased from 15% of revenues
for the three months ended March 31, 1996 to 10% for the three months ended
March 31,
51
<PAGE>
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 $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.
52
<PAGE>
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.
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
53
<PAGE>
investing and financing activities. The Company generated cash flow from
operations of $1.0 million, $1.4 million and $8.2 million for 1994, 1995 and
1996, respectively, and $1.6 million and $3.7 million for the three months
ended March 31, 1996 and 1997, respectively. Carriers' Carrier Services and
Retail Services accounted for $3.2 million and $5.0 million, respectively, of
cash flow from operations for the year ended December 31, 1996 and $2.7
million and $1.0 million, respectively, for the three months ended March 31,
1997. Cash flow from operations related to Carriers' Carrier Services
increased $1.6 million for the year ended December 31, 1996 due to growth in
business and increased $2.2 million for the three months ended March 31, 1997
from the three months ended March 31, 1996, primarily as a result of the
acquisition of Gulf States FiberNet.
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 $3.2 million for the three months ended March 31, 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 $4.3 million for the three months ended March 31, 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 $4.3 million of capital expenditures for
the three months ended March 31, 1997, $2.2 million related to Carriers'
Carrier Services and $2.1 million related to Retail Services.
Cash provided by financing activities was $10.1 million, $200,000, $65.1
million for the years ended December 31, 1994, 1995 and 1996, respectively,
and cash used in financing was $400,000 for the three months ended March 31,
1997. 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." For the three months ended March 31, 1997, ITC Holding
advanced $300,000 to the Company and the Company repaid $600,000 to ITC
Holding.
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 approximately $50
million is expected to be incurred in 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 May 31, 1997, the Company had approximately $10.7
million of obligations to purchase equipment and services. 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."
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 Transmission. In connection
with the Reorganization, $31.0 million of the DeltaCom Indebtedness will be
forgiven by ITC Holding and contributed to the Company as additional equity.
Upon release of the net proceeds from the Offering when the Reorganization is
consummated, the
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Company will use a portion of the proceeds from the Offering to repay the
remaining $43.0 million of the DeltaCom Indebtedness, accrued interest on all
$74.0 million of such indebtedness, the $41.6 million of indebtedness
outstanding under the Bridge Facility and accrued interest thereon. See "Use
of Proceeds."
In January 1995, Gulf States FiberNet entered into an interest rate swap
agreement with a $47.5 million principal amount. The agreement swaps the
applicable three-month LIBOR rate selected under Gulf States FiberNet's
project facility with a fixed rate of 8.25%. As of March 31, 1997, Gulf States
FiberNet would be required to pay $1,851,039 to terminate the interest rate
swap. Gulf States FiberNet made payments totaling $553,320, $1,261,000 and
$266,800 for the years ended December 31, 1995, 1996 and the three months
ended March 31, 1997, respectively, in connection with this interest rate swap
agreement. The Company does not currently intend to terminate this interest
rate swap agreement when the related debt is repaid. The interest rate swap
agreement expires in December 2002.
Prior to the earlier of (i) the date the Company consummates the
Reorganization and certain other conditions are satisfied and (ii) the
redemption of the Exchange Notes (in the event the Reorganization is not
consummated by September 15, 1997), the net proceeds from the Offering will be
held by the Trustee and will be invested in Pledged Securities. Upon
consummation of the Reorganization and the satisfaction of such other
conditions, a portion of the proceeds will be invested in a portfolio of
Pledged Securities (consisting only of U.S. government securities) that will
continue to be held as security for, and to fund, the payment of the first six
scheduled interest payments on the Senior Notes and the Exchange Notes. See
"Description of the Exchange Notes--Special Mandatory Redemption" and "--
Security."
Prior to the release of a portion of the net proceeds from the Offering to
the Company upon the consummation of the Reorganization, ITC Holding will
advance funds to the Company to cover, on an interim basis, certain capital
expenditures related to the Company's expansion of its fiber optic network and
switching equipment. Such advanced funds will not accrue interest and will be
repaid with a portion of the net proceeds from the Offering.
Transmission, which will become a subsidiary of the Company as part of the
Reorganization, has received a commitment letter from NationsBank for the
Credit Facility, which is expected to provide the Company with a $100 million
five-year secured credit facility for working capital and other purposes,
including capital expenditures and permitted acquisitions. The commitment
letter contemplates that the Credit Facility will contain restrictions on the
Company and its subsidiaries and will require the Company to comply with
certain financial tests and to maintain certain financial ratios. See "Risk
Factors--High Leverage; Ability to Service Debt; Restrictive 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 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 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
Exchange Notes.
55
<PAGE>
On a pro forma basis, giving effect to the Transactions, the Company's
earnings would have been insufficient to cover fixed charges by approximately
$19.3 million in 1996 and $6.4 million for the three months ended March 31,
1997 and its EBITDA minus capital expenditures and interest expense would have
been negative $11.1 million and negative $4.6 million, respectively. Although
the Company believes that its liquidity will be substantially improved upon
the release of the net proceeds from the Offering following the consummation
of the Reorganization, the Company's level of indebtedness and debt service
obligations has significantly increased as a result of the Offering. The
Company's cash flow from operations may not be sufficient to repay the
Exchange Notes at maturity and the Exchange Notes may need to be refinanced.
The Company's ability to do so will depend on, among other things, its
financial condition at the time, the restrictions in the agreements governing
its indebtedness and other factors, including market conditions. There can be
no assurance that the Company will be able to improve its earnings before
fixed charges or net cash flow or that the Company will meet its debt service
obligations. The ability of the Company to meet its obligations and effect
such refinancings 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, including factors beyond the control of
the Company. See "Risk Factors--Significant Capital Requirements; Uncertainty
of Additional Financing" and "--High Leverage; Ability to Service Debt;
Restrictive Covenants."
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 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 intends to use a portion of the
proceeds from the Offering to repay a significant portion of the debt incurred
by ITC Holding to finance the DeltaCom Acquisition. See "Use of Proceeds."
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 and EBITDA of approximately
$19.2 million (excluding an estimated $3.4 million of interest income from the
Pledged Securities). For the three months ended March 31, 1997, the Company
had pro forma revenues of approximately $26.3 million and EBITDA of
approximately $6.0 million (excluding an estimated $.9 million of interest
income from the Pledged Securities).
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 5,000 route miles, of which approximately 2,100 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 1,200 route miles to its fiber network by
the end of 1997 through construction or long-term dark fiber leases. In 1996,
the Company's Carriers' Carrier Services business generated pro forma revenues
of approximately $20.2 million and EBITDA of $11.7 million. For the three
months ended March 31, 1997, the Company's Carriers' Carrier Services business
generated pro forma revenues of approximately $6.8 million and EBITDA of
approximately $3.9 million. As of March 31, 1997, on a pro forma basis, the
Company had remaining future long-term contract commitments totaling
approximately $83.7 million. These contracts expire on various dates through
2006 and approximately $61.4 million of such revenues are expected to be
realized through 2001.
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 March 31, 1997, the Company provided
services to over 6,000 business customers. The Company currently offers Retail
Services, other than local exchange services, 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 Company's Retail
Services business generated pro forma revenues of approximately $65.2 million
and EBITDA of approximately $7.5 million. For the three months ended March 31,
1997, the Company's Retail Services business generated pro forma revenues of
approximately $19.5 million and EBITDA of approximately $2.1 million.
The Company expects to begin offering local exchange services as part of its
Retail Services in six to nine markets during the second half of 1997 by
reselling the services of incumbent local exchange carriers and 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 access to 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 customers.
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.
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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 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 in
the southern United States of Retail Services. The Company intends to increase
its market share in existing markets and expand into new markets by: (i)
aggressively expanding its
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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:
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, beginning 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 incumbent local exchange carriers' or other competitive local exchange
carriers' unbundled facilities. 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 13 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 2,100 route miles of
fiber optic network
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extending from Georgia to Texas, with an additional 1,200 owned and operated
route miles expected to be added by the end of 1997. 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. The Company intends to
provide additional types of Retail Services in the future, including 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 current and planned
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 incumbent local exchange carriers' or other
competitive local exchange carriers' unbundled facilities. The Company
intends to begin offering local exchange services in six to nine markets
during the second half of 1997.
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 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. The Interconnection
Agreement has a term of two years.
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.
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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 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.
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 5,000 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 2,100 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
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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.
The Company expects to add a total of 1,200 owned and operated route miles
to its fiber network by the end of 1997 through construction or by long-term
dark fiber leases. 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. 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 exchange 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. 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 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 three Cascade 9000 frame
relay switches located in Atlanta, Georgia and Birmingham and Arab, Alabama.
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 handles over 50 customers
connected to approximately 300 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.
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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 60 direct sales personnel (and over 100 other field personnel) located
in 13 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
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 March 31, 1997, on a pro forma basis, the Company had
remaining future long term contract commitments totaling approximately $83.7
million. These contracts expire on various dates through 2006 and are expected
to generate approximately $61.4 million in revenues to the Company through
2001. 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.
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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 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
seeking approval to provide in-region long distance services. 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 both local and long distance telecommunications services. In addition,
incumbent local exchange carriers are expected to compete in each other's
markets in some cases. For example, in the future Regional Bell Operating
Companies may provide local services within their respective geographic
regions in competition with independent telephone companies, as well as
outside their regions. 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
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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 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. 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 substantial role in
establishing rules for the implementation of local telephone competition. 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 on rates that are reasonable and non-discriminatory. The
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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 access to
telephone numbers, operator services, directory assistance and listings,
network information; and reform of numbering administration.
These various rules remain to be fully implemented. The Telecommunications
Act provides that the incumbent local exchange carriers and other carriers
will attempt to negotiate interconnection agreements pursuant to the rules
developed by the FCC. Where those negotiations are not successful, state PUCs
act as arbitrators, subject to the rights of the parties to seek further
appeals. To date a number of interconnection agreements have been negotiated
or arbitrated, but nevertheless important pricing and operational issues
remain to be resolved in future proceedings. In addition, the incumbent local
exchange carriers have sought judicial appeal of many of the more important
FCC rules, particularly those governing the rates that the incumbent local
exchange carriers may charge for use of their network elements and services.
The U.S. Court of Appeals for the Eighth Circuit has granted a stay of certain
provisions of the Interconnection Decision, including the pricing rules and
rules that would have permitted new entrants to "pick and choose" among
various provisions of existing interconnection agreements. All other
provisions of the Interconnection Decision and related FCC orders remain in
effect pending resolution of the appeal on the merits.
There can be no assurance that the challenged portions of the FCC's rules
will be upheld on appeal, or that the FCC's rules will prove sufficient, as
implemented in the negotiation and arbitration process, to permit local
telephone competition to develop as a general matter.
The Company has entered into the Interconnection Agreement pursuant to which
it will obtain wholesale local telephone services and access to unbundled
network elements from BellSouth. The Interconnection Agreement does not
completely resolve all pricing and operational issues for the resale of local
services or access to the unbundled network elements. Some of such terms may
be affected by legal proceedings regarding FCC regulatory requirements, the
outcome of which will apply to the industry as a whole. However, the Company
expects that the Interconnection Agreement will provide a foundation for it to
provide local service on a reasonable commercial basis. 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.
The Company expects to negotiate similar agreements with other incumbent
local exchange carriers. However, other carriers who have preceded the Company
in the negotiation process 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. 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 a 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 resulted in delays in the implementation of the
Telecommunications Act.
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
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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.
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 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, 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
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provide intrastate long distance service are also pending in several states,
including Maine, Minnesota, New Mexico and Vermont. 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 through resale of the retail local services of the respective incumbent
local exchange carrier in a given territory. The Company has obtained
competitive local exchange carrier certification in Alabama, Florida, Georgia,
Kentucky, Mississippi, South Carolina and Tennessee. Competitive local
exchange carrier petitions for certification are pending in Louisiana and
North Carolina.
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. 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 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 local exchange carriers increasing pricing flexibility. This
flexibility may present the 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.
Regulatory Approvals Required for the Reorganization. Consummation of the
Reorganization is subject to the prior receipt of certain regulatory
approvals. DeltaCom currently holds various interstate and international FCC
authorizations. FCC rules require that any transfer of control of a holder of
such authorizations, including
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the transfer to be effected in the Reorganization, receive the prior consent
of the FCC. The Company has obtained such FCC consent. In addition, the public
service commissions of certain states must consent to the transfer of control
of DeltaCom that will occur in the Reorganization. The Company will also need
to obtain regulatory approval in certain states in connection with the Credit
Facility. The Company has obtained state regulatory approvals in Delaware,
Florida, Mississippi, Nebraska, Nevada, New York, and North Carolina, and may
seek approval in other states as appropriate. Although there can be no
assurance, the Company believes that it will be able to obtain all necessary
state approvals.
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 can be terminated by either
party on 90 days' notice. See "Certain Transactions--ITC Holding." The Company
also leases network operations centers in Birmingham and Arab, Alabama.
The Company operates sales offices in Atlanta (two offices), Georgia,
Pensacola, Florida, Greenville, South Carolina, Charlotte, North Carolina, New
Orleans and Baton Rouge, Louisiana, and Huntsville, Mobile, 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.
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 March 31, 1997, the Company had over 400 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
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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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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth 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. The ages of
the persons set forth below are as of June 30, 1997.
<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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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
Partners 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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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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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 1.5 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 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 March 31, 1997, options to purchase 789,000 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
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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 March 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.
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 among
the entities who will become subsidiaries of the Company upon consummation of
the Reorganization (referred to in this section collectively as 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 directors,
executive officers and stockholders of the Company and its associated
entities.
The Company, through Interstate FiberNet, 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 $197,000 for the three months ended
March 31, 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 $805,000
for the three months ended March 31, 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
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MindSpring. Together, PowerTel, InterCall and MindSpring paid DeltaCom
commissions totaling approximately $514,000 for the year ended December 31,
1996, and $176,000 for the three months ended March 31, 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 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 $221,679 for the three months ended March 31, 1997.
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.
Since 1995, InterCall has provided conference calling services to Interstate
FiberNet 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 $16,000 for the three months ended March 31, 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 $11,323 for the three months ended
March 31, 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 three months ended March 31, 1997, InterQuest recorded interest expenses
to ITC Holding of approximately $123,000, $97,000 and $20,000, respectively.
For the year ended December 31, 1996 and for the three months ended March 31,
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 three months
ended March 31, 1997, DeltaCom sold equipment to Knology for $158,000.
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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.
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 March 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).................................. 319,952 3.8%
Malcolm C. Davenport, V(d)........................... 168,478 2.0
Robert A. Dolson(e).................................. 875,135 10.3
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)............................. 338,674 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)............................................ 5,053,244 57.9
</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 December 31, 1996. 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.
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(b) Includes the following shares that the individuals named below have the
right to purchase within 60 days from March 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................................................... 21,452
Andrew M. Walker..................................................... 8,400
-------
Total.............................................................. 262,122
=======
</TABLE>
(c) Includes 25,978 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; and 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. 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 8,050 shares in the aggregate held of record by Mr. Lanier's wife
and son; 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.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SCANA NOTE
The SCANA Note has been assumed by Transmission, which will become a
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
Transmission (the "Borrower"), which will become a subsidiary of the Company
as part of the Reorganization, 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 consummation
of the Offering and the Reorganization and 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.
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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.
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,
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<PAGE>
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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<PAGE>
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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<PAGE>
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.
SPECIAL MANDATORY REDEMPTION
The Exchange Notes will be redeemed, in whole, on not less than 30 nor more
than 60 days' prior written notice mailed by first class mail to each Holder's
last address as it appears in the Security Register, at a Redemption Price
equal to 101% of their principal amount, plus accrued and unpaid interest to
the Redemption Date, in the event that the Reorganization is not consummated
and certain other conditions are not satisfied by September 15, 1997, or if it
appears, in the sole judgment of the Company, that the Reorganization will not
be consummated and such conditions will not be satisfied by September 15,
1997. On the earlier of (i) September 15, 1997, if the Trustee has not
received an officers' certificate and opinion of counsel that (x) the
Reorganization has been consummated by such date, (y) all material regulatory
approvals required in connection with the Reorganization have been received
and (z) all of the Reorganization Subsidiaries have been released from their
obligations under ITC Holding's credit facility and the liens on the capital
stock and assets of the Reorganization Subsidiaries securing obligations under
such credit facility have been released, and (ii) such date on which the
Trustee receives an officers' certificate stating that the Reorganization will
not be consummated and such conditions will not be satisfied by September 15,
1997, the Trustee will mail by first class mail to each Holder's last address
as it appears in the Security Register a written notice that the Exchange
Notes will be redeemed within 60 days. Prior to the earlier of (i) the date on
which the Reorganization is consummated and (ii) the date on which the
Exchange Notes are redeemed, the net proceeds from the Offering will be held
by the Trustee. Consummation of the Reorganization is subject to receipt of
certain approvals by the FCC and certain state regulatory bodies. Each of the
Reorganization Subsidiaries and ITC Holding will jointly and severally agree
to deposit with the Trustee the amount of funds necessary to permit all
outstanding Exchange Notes to be redeemed, to the extent the proceeds held by
the Trustee are insufficient to redeem the Exchange Notes in the event the
Reorganization is not consummated.
SECURITY
The Indenture provides that upon the release of any proceeds held by the
Trustee in connection with the consummation of the Reorganization, a portion
of the proceeds will 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.
The amount of Pledged Securities to be acquired will depend upon interest
rates prevailing at the time of purchase.
The Pledged Securities will be pledged to the Trustee for the benefit of the
Holders of the Senior Notes and the Exchange Notes pursuant to the Pledge
Agreement and will be held by the Trustee in the Pledge
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<PAGE>
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 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
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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 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 Offering and the Reorganization, as of March 31, 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 Exchange Notes and will not guarantee the
Exchange Notes. As a result, 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 Offering and the Reorganization, as of March 31, 1997, the
Company's subsidiaries would have had approximately $33.7 million of
liabilities (excluding intercompany payables), including approximately $14.6
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.
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"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 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
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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 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
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"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 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
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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 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.
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"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.
"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
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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 (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
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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 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
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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, 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)
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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.
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.
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"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.
"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.
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"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.
"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
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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 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.
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(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 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
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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
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.
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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, 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.
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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 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
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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.
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
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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 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.
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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 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
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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 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
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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 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
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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 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 be issued in fully
registered form without interest coupons. Exchange Notes issued in exchange
for Senior Notes sold in offshore transactions in reliance on Regulation S
under the Securities Act and currently represented by one or more permanent
global Notes will be
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represented by one or more permanent global Notes (each a "Regulation S Global
Note") and will be deposited with the Trustee as custodian for, and registered
in the name of a nominee of, DTC for the accounts of Euroclear and Cedel Bank.
Exchange Notes issued in exchange for Senior Notes sold in reliance on Rule
144A and currently represented by one or more permanent global Notes in
definitive, fully registered form without interest coupons will be represented
by one or more permanent global Notes in definitive, fully registered form
without interest coupons (each a "Restricted Global Note"; and together with
the Regulation S Global Notes, the "Global Notes") and will be deposited with
the Trustee as custodian for, and registered in the name of, a nominee of DTC.
Exchange Notes issued in exchange for Senior Notes held by Institutional
Accredited Investors who are not qualified institutional buyers ("Non-Global
Purchasers") will be in registered form without interest coupons
("Certificated Notes"). Upon the transfer of Certificated Notes initially
issued to a Non-Global Purchaser to a qualified institutional buyer or in
accordance with Regulation S, such Certificated Notes will, unless the
relevant Global Note has previously been exchanged in whole for Certificated
Notes, be exchanged for an interest in a Global Note.
The Global Notes. 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). Qualified institutional buyers
may hold their interests in a Restricted Global Note directly through DTC if
they are participants in such system, or indirectly through organizations
which are participants in such system.
Investors may hold their interests in a Regulation S Global Note directly
through Cedel Bank or Euroclear, if they are participants in such systems, or
indirectly through organizations that are participants in such systems. Cedel
Bank and Euroclear will hold interests in the Regulation S Global Notes on
behalf of their participants through DTC.
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 the applicable procedures of DTC, in addition to those
provided for under the Indenture and, if applicable, those of Euroclear and
Cedel Bank.
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 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. Transfers
between participants in Euroclear and Cedel Bank will be effected in the
ordinary way in accordance with their respective rules and operating
procedures.
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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) only at the direction of one or more participants to whose account
the DTC interest 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 Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A under 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, Euroclear and Cedel Bank are expected to follow the foregoing
procedures in order to facilitate transfers of interests in a Global Note
among participants of DTC, Euroclear and Cedel Bank, they are 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, Euroclear or
Cedel Bank or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
The information in this section concerning DTC, Cedel Bank and Euroclear and
the book-entry system of each organization has been obtained from sources that
the Company believes to be reliable, but the Company takes no responsibility
for the accuracy of such information.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days or, if an
Event of Default under the Indenture has occurred and is continuing, the
Company will issue Certificated Notes in exchange for the Global Notes
representing such Exchange Notes. Upon the exchange of the entire Global Notes
for Certificated Notes, the Global Notes will be cancelled by the Trustee.
Holders of an interest in a Global Note may receive Certificated Notes in
accordance with the 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.
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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.
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.
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LEGAL MATTERS
The legality of the Exchange Notes offered hereby is being passed upon for
the Company by Hogan & Hartson L.L.P., Washington, D.C., special counsel for
the Company. Hogan & Hartson L.L.P. also provides legal services to ITC
Holding, its affiliated companies and Campbell B. Lanier, III. Anthony S.
Harrington, a partner of the firm, beneficially owns 34,800 shares of common
stock of ITC Holding. Certain legal matters relating to the Offering are being
passed upon for the Placement Agents by Shearman & Sterling, New York, New
York.
EXPERTS
The balance sheet of ITC/\DeltaCom, Inc. as of March 31, 1997 included in
this Registration Statement has 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 the Georgia Fiber Assets 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 elsewhere in the Registration Statement, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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.
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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.
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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 will
become a wholly owned subsidiary of the Company as part of the Reorganization
and will change its name to ITC/\DeltaCom Communications, Inc.
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.
will become 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 is currently a wholly owned subsidiary of ITC
Holding and will become a wholly owned subsidiary of the Company as part of
the Reorganization.
Interstate FiberNet--A Georgia general partnership which operates a fiber-
optic telecommunications network between Georgia and Alabama. Interstate
FiberNet will be 100% owned by the Company following 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 will become merged into ITC Transmission Systems 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 will become a wholly owned subsidiary of the Company as
part of the Reorganization and will change 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--March 31, 1997 .......................................... F-3
Notes to Balance Sheet.................................................. F-4
ITC TRANSMISSION SYSTEMS, INC., ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC., EASTERN TELECOM, INC., D.B.A
INTERQUEST, AND DELTACOM, INC.
(TO BE REORGANIZED AS ITC/\DELTACOM, INC.)
Report of Independent Public Accountants................................ F-6
Combined Balance Sheets--December 31, 1995 and 1996 and March 31, 1997
(unaudited) ........................................................... F-7
Combined Statements of Operations for the Years Ended December 31, 1994,
1995, and 1996 and for the Three Months Ended March 31, 1996 and 1997
(unaudited)............................................................ F-8
Combined Statements of Stockholder's Equity for the Years Ended December
31, 1994, 1995, and 1996 and for the Three Months Ended March 31, 1996
and 1997 (unaudited)................................................... F-9
Combined Statements of Cash Flows for the Years Ended December 31, 1994,
1995, and 1996 and for the Three Months Ended March 31, 1996 and 1997
(unaudited)............................................................ F-10
Notes to Combined Financial Statements.................................. F-12
DELTACOM, INC.
Independent Auditors' Report............................................ F-29
Report of Independent Public Accountants................................ F-30
Statements of Operations for the Years Ended December 31, 1994 and 1995
and for the One Month Ended January 29, 1996........................... F-31
Statements of Stockholder's Equity for the Years Ended December 31, 1994
and 1995 and for the One Month Ended January 29, 1996.................. F-32
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995
and for the One Month Ended January 29, 1996........................... F-33
Notes to Financial Statements........................................... F-34
GULF STATES FIBERNET
Report of Independent Public Accountants................................ F-38
Balance Sheets--December 31, 1995 and 1996 and March 27, 1997
(unaudited) ........................................................... F-39
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-40
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...................................................... F-41
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-42
Notes to Financial Statements........................................... F-43
GEORGIA FIBER
Independent Auditors' Report............................................ F-49
Balance Sheets--December 31, 1995 and 1996, and March 31, 1996 and March
27, 1997 (unaudited)................................................... F-50
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-51
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-52
Notes to Financial Statements........................................... F-53
</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 March 31, 1997. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this balance sheet 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 balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of ITC/\DeltaCom, Inc. as of March
31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
June 3, 1997
F-2
<PAGE>
ITC/\DELTACOM, INC.
BALANCE SHEET
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
CASH................................................................... $150,000
--------
Total assets....................................................... $150,000
========
STOCKHOLDER'S EQUITY
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
--------
Total stockholder's equity....................................... $150,000
========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE>
ITC/\DELTACOM, INC.
NOTES TO BALANCE SHEET
MARCH 31, 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 as follows:
. Eastern Telecom, Inc. (d.b.a. InterQuest) and ITC Transmission Systems
II, Inc. will be merged into ITC Transmission Systems, Inc.
("Transmission").
. ITC Holding will contribute all of the outstanding common stock of
Transmission, DeltaCom, Inc. and Gulf States Transmission Systems, Inc.
to the Company.
. The Company will contribute all of the outstanding common stock of
DeltaCom, Inc. and Gulf States Transmission Systems, Inc. to
Transmission.
As of March 31, 1997 and to June 3, 1997, the Company has not conducted any
operations or had any cash flows subsequent to the $150,000 initial
capitalization by ITC Holding. There were no commitments or contingencies at
March 31, 1997.
2. 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 March 31, 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 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
F-4
<PAGE>
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 ($6.75) 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 ($6.75) as determined by the Company's
stockholder's board of directors based on equity transactions and other
analyses.
3. SUBSEQUENT EVENTS
Transmission 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 Transmission and its subsidiaries
to be 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 (the "Offering"). Proceeds from the
Offering will be held by the trustee until all regulatory approvals related to
the reorganization described in Note 1 are received.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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 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 to be contributed to ITC/\DeltaCom, Inc. in
connection with the reorganization as discussed in Note 1) 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 the Credit Facility and Debt Offering
discussions in Note 16, as to which the date is June 3, 1997)
F-6
<PAGE>
ITC TRANSMISSION SYSTEMS, INC.,
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(TO BE REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1995 1996 1997
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 656,096 $ 1,301,415 $ 1,447,289
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 14,893,032
Affiliate............................ 84,796 1,227,661 1,342,121
Inventory............................ 0 543,447 676,101
Prepaid expenses..................... 220,022 1,191,287 1,669,474
Federal income tax refunds receivable
from Parent (Note 8)................ 523,782 2,546,534 2,396,924
Deferred income taxes (Note 8)....... 85,357 525,660 315,431
----------- ------------ ------------
Total current assets............... 3,147,090 18,365,041 22,740,372
----------- ------------ ------------
PROPERTY, PLANT, AND EQUIPMENT, NET
(NOTE 3)............................. 9,386,444 31,880,556 109,892,551
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 59,259,973
Investments (Note 5)................. 6,653,079 7,424,797 0
Other long-term assets............... 13,853 20,010 557,531
----------- ------------ ------------
Total assets....................... $20,922,337 $113,207,979 $192,450,427
=========== ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade................................ $ 376,799 $ 4,192,927 $ 6,161,812
Construction......................... 1,020,904 972,215 2,411,521
Affiliate (Note 12).................. 577,439 658,990 190,264
Accrued interest expense payable to
Parent.............................. 0 5,830,716 7,420,911
Accrued compensation................. 275,856 1,189,395 973,356
Unearned revenue..................... 248,459 762,829 2,370,169
Other accrued liabilities............ 214,769 983,270 2,343,853
Current portion of long-term debt
(Note 6)............................ 675,000 290,140 43,837,880
Current portion of capital lease
obligations (Note 6)................ 0 69,471 538,410
----------- ------------ ------------
Total current liabilities.......... 3,389,226 14,949,953 66,248,176
----------- ------------ ------------
LONG-TERM LIABILITIES:
Advance from Parent (Note 7)......... 1,456,477 74,227,827 74,475,923
Deferred income taxes (Note 8)....... 757,098 3,918,140 4,336,358
Long-term debt (Note 6).............. 1,012,500 640,112 8,611,385
Capital lease obligations (Note 6)... 0 215,421 3,188,370
----------- ------------ ------------
Total long-term liabilities........ 3,226,075 79,001,500 90,612,036
----------- ------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES
6, 7, 10, AND 16)
STOCKHOLDER'S EQUITY:
Common stock (Note 9)................ 26 826 826
Additional paid-in capital........... 14,633,723 23,492,162 40,814,227
Accumulated deficit.................. (326,713) (4,236,462) (5,535,895)
----------- ------------ ------------
Total stockholder's equity......... 14,307,036 19,256,526 35,279,158
----------- ------------ ------------
Total liabilities and stockholder's
equity............................ $20,922,337 $113,207,979 $192,450,427
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-7
<PAGE>
ITC TRANSMISSION SYSTEMS, INC.,
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(TO BE REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------- --------------------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES...... $4,945,902 $5,750,587 $66,518,585 $ 11,287,759 $ 25,422,578
COST OF SERVICES........ 2,484,744 3,149,231 38,756,287 6,414,619 12,197,321
---------- ---------- ----------- ------------ ------------
GROSS MARGIN............ 2,461,158 2,601,356 27,762,298 4,873,140 13,225,257
---------- ---------- ----------- ------------ ------------
OPERATING EXPENSES:
Selling, operations,
and administration... 948,230 1,626,678 18,876,572 3,016,615 7,888,844
Depreciation and amor-
tization............. 738,052 1,267,882 6,438,074 1,196,422 3,842,689
---------- ---------- ----------- ------------ ------------
Total operating ex-
penses............. 1,686,282 2,894,560 25,314,646 4,213,037 11,731,533
---------- ---------- ----------- ------------ ------------
OPERATING INCOME
(LOSS)................. 774,876 (293,204) 2,447,652 660,103 1,493,724
---------- ---------- ----------- ------------ ------------
OTHER INCOME (EXPENSE):
Equity in losses of
unconsolidated sub-
sidiary (Note 5)..... (96,920) (258,242) (1,589,812) (594,763) 0
Interest expense,
net.................. (273,759) (297,228) (6,172,421) (1,118,874) (2,648,742)
Interest and other in-
come (other ex-
pense)............... 82,348 41,734 171,514 33,033 24,497
---------- ---------- ----------- ------------ ------------
Total other ex-
pense.............. (288,331) (513,736) (7,590,719) (1,680,604) (2,624,245)
---------- ---------- ----------- ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES,
PREACQUISITION EARNINGS
(LOSSES) AND
EXTRAORDINARY ITEM..... 486,545 (806,940) (5,143,067) (1,020,501) (1,130,521)
INCOME TAX PROVISION
(BENEFIT).............. 113,248 (302,567) (1,233,318) (301,133) (264,471)
---------- ---------- ----------- ------------ ------------
INCOME (LOSS) BEFORE
PREACQUISITION EARNINGS
(LOSSES) AND
EXTRAORDINARY ITEM..... 373,297 (504,373) (3,909,749) (719,368) (866,050)
PREACQUISITION EARNINGS
(LOSSES) (NOTE 1)...... 236,300 0 0 0 (74,132)
---------- ---------- ----------- ------------ ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM..... 136,997 (504,373) (3,909,749) (719,368) (791,918)
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) $ (719,368) $ (1,299,433)
========== ========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-8
<PAGE>
ITC TRANSMISSION SYSTEMS, INC.,
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(TO BE 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
Net loss.............. 0 0 0 (1,299,433) (1,299,433)
------- ---- ----------- ----------- -----------
BALANCE, MARCH 31, 1997
(UNAUDITED)............ $82,630 $826 $40,814,227 $(5,535,895) $35,279,158
======= ==== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-9
<PAGE>
ITC TRANSMISSION SYSTEMS, INC.,
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(TO BE REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED
--------------------------------------- -------------------------
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) $ (719,368) $(1,299,433)
------------ ----------- ------------ ------------ -----------
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 1,196,422 3,842,689
Amortization of debt
issuance costs....... -- -- -- -- 59,484
Deferred income
taxes................ 165,195 368,998 611,530 0 87,048
Equity in losses of
investee............. 96,920 258,242 1,589,812 556,235 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 11,500 16,899
Changes in current
operating assets and
liabilities:
Accounts receivable.. (1,321,852) 471,988 (2,646,760) (797,049) (1,803,880)
Inventory............ 0 0 (182,853) (105,630) (132,654)
Prepaid expenses..... (14,390) (93,563) (246,159) 40,489 (422,389)
Income tax refunds
receivable from
Parent.............. (52,609) (471,619) (2,022,752) 0 149,610
Accounts payable..... 491,656 15,083 1,506,728 1,259,942 (994,506)
Accrued interest..... 0 0 5,830,716 1,060,130 1,590,195
Unearned revenue..... 240,234 4,225 514,370 28,322 1,607,340
Accrued compensation
and other accrued
liabilities......... 227,855 31,718 698,290 (831,272) 614,441
Other, net........... (14,377) 443 (6,482) (91,739) 0
------------ ----------- ------------ ------------ -----------
Total adjustments... 841,778 1,941,690 12,098,367 2,327,350 5,047,660
------------ ----------- ------------ ------------ -----------
Net cash provided by
operating
activities......... 978,775 1,437,317 8,188,618 1,607,982 3,748,227
------------ ----------- ------------ ------------ -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... (4,003,835) (2,526,646) (6,003,971) (974,012) (4,250,082)
Change in accrued
construction costs.... 300,000 720,904 (168,689) (285,076) 458,764
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) (65,294,775) (3,216,718)
------------ ----------- ------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-10
<PAGE>
ITC TRANSMISSION SYSTEMS, INC.,
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(TO BE REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED
---------------------------------------- -------------------------
1994 1995 1996 1996 1997
------------ ----------- ------------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANC-
ING ACTIVITIES:
Proceeds from long-term
debt.................. $ 2,700,000 $ 0 $ 0 $ 0 $ 0
Repayment of long-term
debt and capital lease
obligations........... (337,500) (675,000) (10,619,682) (10,330,884) 0
Proceeds from advance
from Parent........... 854,190 0 74,005,598 74,005,598 287,159
Repayment of advance
from Parent........... 0 (195,000) (1,234,248) (1,104,887) (48,329)
Capital contributions
from Parent, net...... 6,884,832 1,050,000 2,859,239 2,189,095 (624,465)
Proceeds from note re-
ceivable.............. 0 0 139,076 0 0
------------ ----------- ------------- ------------ -----------
Net cash provided by
(used in) financing
activities............ 10,101,522 180,000 65,149,983 64,758,922 (385,635)
------------ ----------- ------------- ------------ -----------
INCREASE IN CASH AND
CASH EQUIVALENTS....... 376,462 138,559 645,319 1,072,129 145,874
------------ ----------- ------------- ------------ -----------
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 $ 1,728,225 $ 1,447,289
============ =========== ============= ============ ===========
SUPPLEMENTAL CASH FLOW
DISCLOSURES:
Cash paid for inter-
est................... $ 143,762 $ 174,513 $ 280,791 $ 72,890 $ 23,033
============ =========== ============= ============ ===========
Cash paid for income
taxes, net of refunds
received.............. $ 7,000 $ 11,558 $ 546,501 $ 117,964 $ (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
============ =========== ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-11
<PAGE>
ITC TRANSMISSION SYSTEMS, INC.,
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(TO BE REORGANIZED AS ITC/\DELTACOM, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION, BASIS OF PRESENTATION, AND NATURE OF BUSINESS
Organization
ITC Transmission Systems, Inc. ("Transmission"), 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") and are
collectively referred to herein as the "Companies." Following the consummation
of the proposed debt offering described elsewhere in this Offering Memorandum,
the Parent will reorganize the Companies as follows (the "Reorganization") for
the purpose of completing the transactions more fully described in Note 16:
a. InterQuest and Transmission II will be merged into Transmission.
b. The Parent will contribute all of the outstanding stock of
Transmission, DeltaCom and GSTS to the Parent's new wholly owned
subsidiary ITC/\DeltaCom, Inc. ("ITC/\DeltaCom").
c. ITC/\DeltaCom will contribute all of the outstanding common stock of
DeltaCom and GSTS to Transmission.
At December 31, 1996, Transmission 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
will be absorbed by law into Transmission. 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.
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.
The combined balance sheet as of March 31, 1997 and the combined statements
of operations and cash flows for the three months ended March 31, 1996 and
1997 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 period. The results of operations for the three months ended March 31,
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
Transmission, which held a 49% ownership interest, and SCANA Communications,
Inc. ("SCANA"), which held the remaining 51% interest. Transmission
F-12
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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 three months ended March
31, 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 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.
F-13
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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>
F-14
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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 Transmission, 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
F-15
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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>
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
F-16
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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
Transmission 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.
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 Transmission
during 1994.
As discussed in Note 1, effective with the Reorganization, the partners of
Interstate will merge and the partnership will be absorbed by law into
Transmission.
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>
F-17
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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>
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>
F-18
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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 1), 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 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.
The Parent Credit Facility includes certain financial covenants and ratios.
At December 31, 1996, the Parent was in compliance with these requirements.
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.
F-19
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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>
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.
F-20
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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>
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>
Transmission................................ 1,000 100 $0.01
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>
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.
F-21
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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>
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>
F-22
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
Legal Proceedings
In 1996, a company filed suit against DeltaCom and three employees of
DeltaCom alleging breach of nonsolicitation agreements, tortious interference
with contractual and business relationships, and misappropriation of trade
secrets. The company is suing for injunctive relief, punitive damages, and
reimbursement of attorney fees. DeltaCom is indemnified by its former
stockholders against both the attorneys' fees incurred in defending this suit
and any adverse judgment resulting from the suit. In management's opinion, the
outcome of this suit will not have a material effect on DeltaCom's financial
statements.
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.
F-23
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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 Transmission 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; CyberNet Holding, Inc.
("CyberNet"), 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,
F-24
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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 CyberNet totaled $62,830. The
Companies also provided certain engineering and construction- related
management services to CyberNet in 1995. The Fiber Companies did not bill
CyberNet for these services, which are estimated by the Fiber Companies to
have a value of approximately $50,000.
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 CyberNet. He has
served in his capacity as chief executive officer and president of CyberNet at
the request of CyberNet and the Parent and received no compensation from
CyberNet for the year ended December 31, 1996. He resigned as chief executive
officer and president of CyberNet 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.
F-25
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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-26
<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
Transmission. The Gulf States partnership has been dissolved. The SCANA Note
was assumed by Transmission and the Parent was released from its obligations
thereunder.
F-27
<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 matures on the earlier of
the date the proceeds from ITC/\DeltaCom's debt offering described below are
released or December 31, 1997. The GSTS Bridge Facility bears interest at
LIBOR plus 2.25%.
Employee Stock Option Plan
Upon the Reorganization, all employees of the Companies will become eligible
to receive stock options under ITC/\DeltaCom's 1997 Employee Stock Option Plan.
Credit Facility
Transmission 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
following the Reorganization. The Credit Facility is expected to contain a
number of covenants applicable to Transmission and its subsidiaries following
the Reorganization and to ITC/\DeltaCom, 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 senior notes with a
principal value of $200 million at an interest rate of 11% (the "Offering").
There are significant potential risks associated with the Companies' ability
to compete profitably in this industry. See the "Risk Factors" section in the
foregoing Offering Memorandum related to the Offering for a discussion of
these risks.
Proceeds from the Offering will be held by the trustee until all regulatory
approvals related to the Reorganization described in Note 1 are received. Upon
their release, a portion of the proceeds will be used to repay approximately
$43.0 million of the Companies' advances from Parent as well as the GSTS
Bridge Facility. At such time, the Parent will forgive and contribute the
remaining $31.0 million of outstanding advances to ITC/\DeltaCom as additional
equity. Upon the repayment of DeltaCom's advance from Parent related to the
acquisition (and accrued interest), the Parent Credit Facility will be amended
to release the Companies as guarantors (Note 7). Following the completion of
these transactions, the Parent will effect the Reorganization.
F-28
<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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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
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-35
<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
In January 1996, a company filed suit against the Company and three
employees of the Company alleging breach of nonsolicitation agreements,
tortious interference with contractual and business relationships, and
misappropriation of trade secrets. The Company is suing for injunctive relief,
punitive damages, and reimbursement of attorney fees. The Company is
indemnified by its former stockholders against both the attorneys' fees
incurred in defending this suit and any adverse judgment resulting from the
suit. In management's opinion, the outcome of this suit will not have a
material effect on the Company's financial statements.
F-36
<PAGE>
DELTACOM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company is subject to various other 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-37
<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 ITC/\DeltaCom
Debt Offering discussion in
Note 8, as to which the date
is June 3, 1997)
F-38
<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
ONG-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-39
<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-40
<PAGE>
GULF STATES FIBERNET
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
<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
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-41
<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) (22,073) (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 1,371,247 (139,332)
------------ ------------ ----------- ------------ -----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............ 513,436 5,048,301 (4,431,069) (2,138,901) (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-42
<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-43
<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-44
<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
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 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
F-45
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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>
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
F-46
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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................................................... 23.0 36.5
</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 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:
F-47
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<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 has 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 bears
interest on outstanding amounts at various floating rate options plus an
applicable credit margin. The final maturity of the Bridge Facility is the
earlier of December 31, 1997 or the release of the proceeds from the proposed
debt offering discussed later.
Parent's Reorganization of Subsidiaries
In March 1997, ITC formed a new wholly owned subsidiary, ITC/\DeltaCom, Inc.
("ITC/\DeltaCom"). Upon completion of the proposed debt offering and the
related transactions described below, ITC plans to reorganize several of its
wholly owned subsidiaries as follows:
. Eastern Telecom, Inc. (d.b.a. InterQuest) and ITC Transmission Systems
II, Inc. will be merged into ITC Transmission Systems, Inc.
("Transmission").
. ITC will contribute all of the outstanding common stock of Transmission,
DeltaCom, Inc. and GSTS to ITC/\DeltaCom.
. ITC/\DeltaCom will contribute all of the outstanding common stock of
DeltaCom and GSTS to Transmission.
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 will be held by the
trustee until all required regulatory approvals related to the Reorganization
are received. Upon consummation of the Reorganization, a portion of the
proceeds will be used to repay the Bridge Facility described above as well as
certain advances from the Parent outstanding at DeltaCom, Inc.
F-48
<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-49
<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-50
<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-51
<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-52
<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-53
<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-54
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPEC-
TUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE LETTER OF TRANS-
MITTAL 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 LETTER OF TRANSMITTAL. NEITHER THIS PROSPECTUS
NOR THE LETTER OF TRANSMITTAL CONSTITUTES 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 OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY RE-
QUIREMENT 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 supercedes 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 supercedes 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.
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.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
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.
10.35 Amendment to Interconnection Agreement relating to resale of BellSouth
services dated March 12, 1997 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.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
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.
12.1 Statement regarding Computation of Ratios.
21.1 Subsidiaries of ITC/\DeltaCom, Inc. (giving effect to the
Reorganization).
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 three month period ended March 31,
1997.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* To be filed by amendment.
(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, 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
II-4
<PAGE>
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.
II-5
<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 16TH
DAY OF JULY, 1997.
ITC/\DELTACOM, INC.
/s/ Andrew M. Walker
By __________________________________
ANDREW M. WALKER
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Campbell B. Lanier, III, Andrew M. Walker and
Douglas A. Shumate, jointly and severally, each in his own capacity, his true
and lawful attorneys-in-fact, with full power of substitution, for him and his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents with full power and authority to do so
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
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 16TH DAY OF JULY, 1997.
SIGNATURE TITLE
/s/ Campbell B. Lanier, III 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)
/s/ Donald W. Burton Director
_____________________________________
DONALD W. BURTON
/s/ Malcolm C. Davenport, V Director
_____________________________________
MALCOLM C. DAVENPORT, V
II-6
<PAGE>
SIGNATURE TITLE
/s/ Robert A. Dolson Director
- -------------------------------------
ROBERT A. DOLSON
/s/ O. Gene Gabbard Director
- -------------------------------------
O. GENE GABBARD
/s/ William T. Parr Director
- -------------------------------------
WILLIAM T. PARR
/s/ William H. Scott, III Director
- -------------------------------------
WILLIAM H. SCOTT, III
/s/ William B. Timmerman Director
- -------------------------------------
WILLIAM B. TIMMERMAN
II-7
<PAGE>
INDEX TO THE FINANCIAL STATEMENT SCHEDULE
ITC TRANSMISSION SYSTEMS, INC.
ITC TRANSMISSION SYSTEMS II, INC.
GULF STATES TRANSMISSION SYSTEMS, INC.
EASTERN TELECOM, INC., d.b.a. INTERQUEST
DELTACOM, INC. (TO BE 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
ToITC 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 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 June 3, 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
March 27, 1997
S-2
<PAGE>
ITC TRANSMISSION SYSTEMS, INC.,
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(TO BE 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 supercedes 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 supercedes 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.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
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<C> <S>
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.
10.18 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.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
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.
10.36 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.
12.1 Statement regarding Computation of Ratios.
21.1 Subsidiaries of ITC/\DeltaCom, Inc. (giving effect to the
Reorganization).
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 three month period ended March 31,
1997.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
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* To be filed by amendment.
3
<PAGE>
Exhibit 1.1
ITC/\DELTACOM, INC.
PLACEMENT AGREEMENT
May 29, 1997
Morgan Stanley & Co. Incorporated,
for itself and the other
several Placement Agents
named below
1585 Broadway
New York, New York 10036-8293
Dear Sirs:
ITC/\DeltaCom, Inc., a Delaware corporation ("ITC"), proposes to issue
and sell to you (the "Manager") and the other several purchasers named in
Schedule I hereto (collectively with the Manager, the "Placement Agents")
$200,000,000 aggregate principal amount of its 11% Senior Notes due 2007 (the
"Notes") to be issued pursuant to the provisions of an Indenture to be dated as
of June 3, 1997 (the "Indenture") between ITC and United States Trust Company
of New York, Trustee (the "Trustee"). In connection with the sale of the Notes,
ITC/\DeltaCom, Inc., Eastern Telecom, Inc., ITC Transmission Systems, Inc., ITC
Transmission Systems II, Inc., Interstate FiberNet and Gulf States Transmission
Systems, Inc. (such entities, excluding ITC, collectively referred to as the
"Reorganization Subsidiaries" and, including ITC, collectively referred to as
the "Group") and ITC Holding Company, Inc. ("Holding Co.") will effect a
corporate reorganization (the "Reorganization") pursuant to which ITC will
become the holding company parent of the Reorganization Subsidiaries or their
successors-in-interest. The "Company" refers to the Group prior to the
Reorganization and to ITC after the Reorganization. Capitalized terms used
herein but not defined have the meanings specified therefor in the Final
Memorandum (as defined below).
The net proceeds from the issuance of the Notes will be held by the
Trustee pursuant to a pledge and security agreement to be dated as of the
Closing Date (as defined below) and to be substantially in the form attached
hereto as Exhibit A, with such revisions as shall be reasonably satisfactory to
the Placement Agents and ITC (the "Pledge and Security Agreement"). In
connection with the consummation of the Reorganization, the Trustee will release
Collateral (as defined in the Pledge and Security Agreement) such that the
amount of funds remaining subject to the Pledge and Security Agreement would
equal an amount sufficient to purchase a sufficient amount of Pledged Securities
to provide for the first six
<PAGE>
2
scheduled interest payments due on the Notes. In the event the Reorganization is
not consummated by September 15, 1997, ITC will be required to consummate a
Special Mandatory Redemption.
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), to qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act, in offshore transactions in reliance on
Regulation S under the Securities Act ("Regulation S") and to institutional
accredited investors (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that deliver a letter in the form annexed to the Final
Memorandum.
The Placement Agents and their direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement, dated the date
hereof and to be substantially in the form attached hereto as Exhibit B (the
"Registration Rights Agreement").
In connection with the sale of the Notes, the Company has prepared a
preliminary private placement memorandum (the "Preliminary Memorandum") and will
prepare a final private placement memorandum (the "Final Memorandum" and, with
the Preliminary Memorandum, each a "Memorandum") setting forth or including a
description of the terms of the Notes, the terms of the offering and a
description of the Company and its business.
1. Representations and Warranties. Each member of the Group
------------------------------
represents and warrants to, and agrees with, you that as of the date hereof:
(a) The Preliminary Memorandum does not contain and the Final
Memorandum, in the form used by the Placement Agents to confirm sales and on the
Closing Date, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 1(a) do not apply to
statements or omissions in either Memorandum based upon information relating to
any Placement Agent furnished to ITC in writing by such Placement Agent through
you expressly for use therein.
(b) Each member of the Group that is a corporation has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in each
Memorandum and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on
<PAGE>
3
the Company and its subsidiaries, taken as a whole; Schedule 1 to the form of
opinion of Hogan & Hartson L.L.P. attached hereto as Exhibit C, sets forth each
jurisdiction in which the conduct of the Company's business or its ownership or
leasing of property requires any member of the Group (other than DeltaCom, Inc.)
to be qualified as a foreign corporation or partnership, other than
jurisdictions in which the failure to be qualified in all such jurisdictions
would not, in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole. Schedule 1 to the form of opinion of Thomas
Mullis attached hereto as Exhibit F sets forth each jurisdiction in which the
conduct of DeltaCom, Inc.'s business or its ownership or leasing of property
requires DeltaCom, Inc. to be qualified as a foreign corporation, other than
jurisdictions in which the failure to be qualified in all such jurisdictions
would not, in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(c) Each member of the Group that is a partnership has been duly
formed and is validly existing as a partnership in good standing under the laws
of the jurisdiction of its organization, has the partnership power and authority
to own its property and to conduct its business as described in each Memorandum
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(d) This Agreement has been duly authorized, executed and
delivered by Holding Co. and each member of the Group.
(e) The Notes have been duly authorized by ITC and, when executed
and authenticated in accordance with the terms of the Indenture and delivered to
and paid for by the Placement Agents in accordance with the terms of this
Agreement, will (x) be valid and binding obligations of ITC enforceable against
ITC in accordance with their terms, except as (A) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (B) rights of acceleration, if applicable, and the availability of
equitable remedies may be limited by equitable principles of general
applicability and (y) be entitled to the benefits of the Indenture.
(f) The Indenture has been duly authorized by ITC and, when
executed and delivered by ITC, will be a valid and binding agreement of ITC,
enforceable against ITC in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (y) rights of acceleration, if
applicable, and the availability of equitable remedies may be limited by
equitable principles of general applicability.
<PAGE>
4
(g) The Registration Rights Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, ITC,
enforceable against ITC in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally, (y) the availability of equitable
remedies may be limited by equitable principles of general applicability and (z)
the rights to indemnification and contribution thereunder may be limited by
state or federal securities laws or the policies underlying such laws.
(h) The Pledge and Security Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, Holding Co.
and each member of the Group, enforceable against Holding Co. and each member of
the Group in accordance with its terms except as (x) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) the availability of equitable remedies may be limited
by equitable principles of general applicability; and upon the Closing Date, the
pledge of the Collateral (as defined in the Pledge and Security Agreement)
securing the payment of the Obligations (as defined in the Pledge and Security
Agreement) for the benefit of the Trustee and the holders of the Notes will
constitute a first priority perfected security interest in such Collateral,
enforceable against all creditors of Holding Co. and any member of the Group.
(i) The execution and delivery by ITC of, and the performance by
ITC of its obligations under, this Agreement, the Indenture, the Registration
Rights Agreement, the Pledge and Security Agreement and the Notes (collectively,
the "Transaction Documents"), the issuance, sale and delivery of the Notes and
the execution and delivery by each other member of the Group and Holding Co. of,
and the performance by each such member of the Group and Holding Co. of their
respective obligations under, this Agreement and the Pledge and Security
Agreement will not contravene any provision of applicable law or the certificate
of incorporation or by-laws or partnership agreement of any member of the Group
or Holding Co. or any material agreement or other material instrument binding
upon any such entity or any of its subsidiaries or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over the Company
or any of its subsidiaries, and no permit, license, consent, approval,
authorization or order of, or filing, declaration or qualification with, any
governmental body or agency is required for the performance by any member of the
Group or Holding Co. of their respective obligations under the Transaction
Documents, except (i) such as may be required by the securities or Blue Sky laws
of the various states in connection with the offer and sale of the Notes and
(ii) such as are required to be obtained after the date hereof and specifically
set forth in the Transaction Documents. Schedule 2 to the form of opinion of
Hogan & Hartson L.L.P. attached hereto as Exhibit C sets forth all material
agreements and instruments to which any member of the Group is a party. Schedule
2 to the form of opinion of Thomas Mullis attached hereto as Exhibit F sets
forth all material agreements and instruments to which DeltaCom, Inc. is a
party.
<PAGE>
5
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Preliminary Memorandum. Furthermore, except in each case as described in the
Final Memorandum, (i) the Company and its subsidiaries have not incurred any
material liability or obligation, direct or contingent, nor entered into any
material transaction not in the ordinary course of business; (ii) neither the
Company nor any of its subsidiaries has purchased any of the Company's
outstanding capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on the Company's capital stock; and (iii) there has not
been any material change in the capital stock, short-term debt or long-term debt
of the Company and its subsidiaries, taken as a whole.
(k) There are no legal or governmental proceedings pending or
threatened to which it or any of its subsidiaries is a party or to which any of
its or any of its subsidiaries' properties is subject other than proceedings
accurately described in all material respects in each Memorandum and proceedings
that would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, or on the power or ability of Holding Co. or any
member of the Group to perform its respective obligations under the Transaction
Documents or to consummate the transactions contemplated by the Final
Memorandum.
(l) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "Affiliate") of the Company
has directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Notes in a
manner that would require the registration under the Securities Act of the Notes
or (ii) engaged in any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) in connection
with the offering of the Notes or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act.
(m) ITC is not and, after giving effect to the offering and sale
of the Notes and the application of the proceeds thereof as described in the
Final Memorandum, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(n) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Placement Agents in the manner contemplated by this
Agreement to register the Notes under the Securities Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended.
<PAGE>
6
(o) It and each of its subsidiaries (i) have all necessary consents,
authorizations, approvals, orders, certificates and permits of and from, and has
made all declarations and filings with, all federal, state, local and other
governmental, administrative or regulatory authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease, license and use
its properties and assets and to conduct its business in the manner described in
each Memorandum, except to the extent that the failure to obtain such consents,
authorizations, approvals, orders, certificates and permits or make such
declarations and filings would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole, and (ii) have not received any notice of
proceedings relating to revocation or modification of any such consent,
authorization, approval, order, certificate or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
reasonably be expected to result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, except as described in or
contemplated by each Memorandum.
(p) It and each of its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants, including
all such laws and regulations concerning electromagnetic radio frequency
emissions ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
its businesses and (iii) are in compliance with all terms and conditions of any
such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(q) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(r) None of the Company, its Affiliates or any person acting on its
or their behalf (other than the Placement Agents) has engaged in any directed
selling efforts (as that term is defined in Regulation S) with respect to the
Notes and the Company and its Affiliates and any person acting on its or their
behalf (other than the Placement Agents) have complied with the offering
restrictions requirement of Regulation S.
<PAGE>
7
(s) It and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(t) It and each of its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to its business, in each case free and
clear of all liens, encumbrances and defects, except such as are described in
each Memorandum, such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
them; and any real property and buildings held under lease by them are held
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such property and buildings by them, in each case except as described in
or contemplated by each Memorandum.
(u) It and its subsidiaries own or possess, or can acquire on
reasonable terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with their businesses as now operated, and neither it nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
(v) No material labor dispute exists with its employees or the
employees of any of its subsidiaries, except as described in or contemplated by
each Memorandum, or, to its knowledge, is imminent; and it is not aware of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors that could result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole.
(w) It and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither it nor any of its subsidiaries has
<PAGE>
8
been refused any insurance coverage sought or applied for; and neither it nor
any of its subsidiaries has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, except as described in or
contemplated by each Memorandum.
(x) The historical and pro forma financial statements included in
each Memorandum comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the related published rules
and regulations.
(y) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
2. Offering. You have advised ITC that the Placement Agents
--------
will make an offering of the Notes purchased by the Placement Agents hereunder
on the terms set forth in the Final Memorandum as soon as practicable after this
Agreement is entered into as in your judgment is advisable.
3. Purchase and Delivery. ITC hereby agrees to sell to the
---------------------
several Placement Agents, and the Placement Agents, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agree, severally and not jointly, to purchase from ITC the
respective principal amount of Notes set forth in Schedule I hereto opposite
their names at a purchase price of 97% of the principal amount thereof plus
accrued interest, if any, from June 3, 1997 to the date of payment and
delivery.
Payment for the Notes shall be made against delivery of the Notes at a
closing (the "Closing") to be held at the office of Shearman & Sterling, 599
Lexington Avenue, New York, New York, at 9:00 A.M., local time, on June 3, 1997,
or at such other time on the same or such other date, not later than June 17,
1997, as shall be designated in writing by you. The time and date of such
payment are herein referred to as the Closing Date. Payment for the Notes shall
be made to ITC (which will immediately deposit such funds as required by the
Pledge and Security Agreement) in federal funds or other funds immediately
available in New York City.
Certificates for the Notes shall be in definitive form and registered
in such names and in such denominations as you shall request in writing not less
than one full business day prior to the Closing Date. The certificates
evidencing the Notes shall be delivered to you on the Closing Date for the
respective accounts of the several Placement Agents, with any
<PAGE>
9
transfer taxes payable in connection with the transfer of the Notes to the
Placement Agents duly paid, against payment of the purchase price therefor.
4. Conditions to Closing. The several obligations of the
---------------------
Placement Agents under this Agreement to purchase the Notes will be subject to
the following conditions:
(a) Subsequent to the date of this Agreement and prior to the
Closing Date,
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by
any "nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations, of the Company and its
subsidiaries, taken as a whole, from that set forth in the Preliminary
Memorandum that, in your judgment, is material and adverse and that makes
it, in your judgment, impracticable to market the Notes on the terms and in
the manner contemplated in the Final Memorandum.
(b) You shall have received on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of each member of the Group,
to the effect set forth in clause (a)(i) above and to the effect that the
representations and warranties of each member of the Group contained in this
Agreement are true and correct in all material respects as of the Closing Date
and that each member of the Group has complied in all material respects with all
of the agreements and satisfied all of the conditions on its part to be
performed or satisfied on or before the Closing Date.
The officer signing and delivering any such certificate may rely upon
the best of his knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of Hogan
& Hartson L.L.P. counsel for the Company, dated the Closing Date, in the form
set forth in Exhibit C.
The opinion of Hogan & Hartson L.L.P. shall be rendered to you at
the request of ITC and shall so state therein.
<PAGE>
10
(d) You shall have received on the Closing Date an opinion of
Brantley & Wilkerson, P.C., Alabama communications counsel for the Company,
dated the Closing Date, in the form set forth in Exhibit D.
The opinion of Brantley & Wilkerson, P.C. shall be rendered to you
at the request of ITC and shall so state therein.
(e) You shall have received on the Closing Date an opinion of
Stowers, Hayes, Clark & Roane, Georgia communications counsel for the Company,
dated the Closing Date, in the form set forth in Exhibit E.
The opinion of Stowers, Hayes, Clark & Roane shall be rendered to
you at the request of ITC and shall so state therein.
(f) You shall have received on the Closing Date an opinion of Thomas
Mullis, General Counsel of DeltaCom, Inc., dated the Closing Date, in the form
set forth in Exhibit F.
The opinion of Thomas Mullis shall be rendered to you at the request
of ITC and DeltaCom, Inc. and shall so state therein.
(g) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Placement Agents, dated the Closing Date,
in form and substance satisfactory to you.
(h) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from the Company's
independent public accountants, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Final Memorandum.
(i) You shall have received such other certificates and documents as
you or your counsel may request.
5. Covenants of the Group. In further consideration of the
----------------------
agreements of the Placement Agents contained in this Agreement, each member of
the Group (and, with respect to paragraph (m), Holding Co.) covenants as
follows:
(a) To furnish to you, without charge, during the period mentioned
in paragraph (c) below, as many copies of the Final Memorandum and any
supplements and
<PAGE>
11
amendments thereto as you may reasonably request and to use its best efforts to
deliver such copies to you by 10:00 a.m. (New York City time) on the business
day next following the execution of this Agreement.
(b) Before amending or supplementing either Memorandum, to furnish
to you a copy of each such proposed amendment or supplement and not to use any
such proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to the
date on which all of the Notes shall have been sold by the Placement Agents, any
event shall occur or condition exist as a result of which it is necessary in
your judgment to amend or supplement the Final Memorandum in order to make the
statements therein, in the light of the circumstances when such Memorandum is
delivered to a purchaser, not misleading, or if, in the opinion of counsel to
the Placement Agents, it is necessary to amend or supplement such Memorandum to
comply with applicable law, forthwith to prepare and furnish, at its own
expense, to the Placement Agents, either amendments or supplements to such
Memorandum so that the statements in such Memorandum as so amended or
supplemented will not, in the light of the circumstances when such Memorandum is
delivered to a purchaser, be misleading or so that such Memorandum, as so
amended or supplemented, will comply with applicable law.
(d) To endeavor to qualify the Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) Whether or not any sale of such Notes is consummated, to pay all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the preparation of each Memorandum and all amendments and
supplements thereto, (ii) the preparation, issuance and delivery of the Notes,
(iii) the fees and disbursements of the Company's counsel and accountants and
the Trustee and its counsel, (iv) the qualification of such Notes under
securities or Blue Sky laws in accordance with the provisions of Section 5(d),
including filing fees and the fees and disbursements of counsel for the
Placement Agents in connection therewith and in connection with the preparation
of any Blue Sky or legal investment memoranda, (v) the printing and delivery to
the Placement Agents in quantities as hereinabove stated of copies of the
Memorandum and any amendments or supplements thereto, (vi) any fees charged by
rating agencies for the rating of such Notes, (vii) all document production
charges and expenses of counsel to the Placement Agents (but not including their
fees for professional services) in connection with the preparation of this
Agreement, (viii) the fees and expenses, if any, incurred in connection with the
admission of such Notes for trading in PORTAL or any other appropriate market
system, (ix) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the marketing of
the Notes, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in
<PAGE>
12
connection with the road show presentations with the prior approval of the
Company, travel and lodging expense of the representatives and officers of the
Company and any such consultants, and the cost of any aircraft chartered in
connection with the road show, and (x) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section.
(f) Neither the Company nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) which could be integrated with the sale of the
Notes in a manner which would require the registration under the Securities Act
of such Notes.
(g) Not to solicit any offer to buy or offer or sell the Notes by
means of any form of general solicitation or general advertising (as those terms
are used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act.
(h) While any of the Notes remain outstanding, ITC will make
available, upon request, to any seller of such Notes the information specified
in Rule 144A(d)(4) under the Securities Act, unless ITC is then subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(i) None of the Company, its Affiliates or any person acting on its
or their behalf (other than the Placement Agents) will engage in any directed
selling efforts (as that term is defined in Regulation S) with respect to the
Notes, and the Company and its Affiliates and each person acting on its or their
behalf (other than the Placement Agents) will comply with the offering
restrictions of Regulation S.
(j) To use its best efforts to permit the Notes to be designated
PORTAL securities in accordance with the rules and regulations adopted by the
National Association of Securities Dealers, Inc. relating to trading in the
PORTAL Market.
(k) To use the net proceeds received by it from the sale of the
Notes pursuant to this Agreement in the manner specified in the Final Memorandum
under the caption "Use of Proceeds."
(l) ITC will, and will cause the Trustee to, refuse to register any
transfer of any Notes sold pursuant to Regulation S if such transfer is not made
in accordance with the provisions of Regulation S.
(m) If ITC is required to effect a Special Mandatory Redemption and
for any reason the amount of the Collateral (as defined in the Pledge and
Security Agreement) to
<PAGE>
13
be released is insufficient to pay the aggregate purchase price to redeem the
Notes as provided in the Indenture, each member of the Group and Holding Co.
jointly and severally agree to pay to the Paying Agent under the Indenture on or
prior to the redemption date the amount of funds necessary to permit all
outstanding Notes to be redeemed in accordance with the provisions of the
Indenture.
(n) Not to consummate any Asset Sale (as defined in the Indenture)
prior to the consummation of the Reorganization other than sales, transfers or
other dispositions of property or equipment having a fair market value not to
exceed $20 million to a Person pursuant to a written agreement which provides
for the repurchase or reacquisition of such property or equipment by the Company
or any of its Restricted Subsidiaries upon termination of such agreement or at
the option of the Company or any of its Restricted Subsidiaries for equal or
lesser consideration.
6. Offering of Notes; Restrictions on Transfer. (a) Each Placement
-------------------------------------------
Agent, severally and not jointly, represents and warrants to the Company that
such Placement Agent is a qualified institutional buyer as defined in Rule 144A
under the Securities Act (a "QIB"). Each Placement Agent, severally and not
jointly, agrees with the Company that (i) it will not solicit offers for, or
offer or sell, such Notes by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it will solicit offers for such Notes only from,
and will offer such Notes only to, persons that it reasonably believes to be (A)
in the case of offers inside the United States, (x) QIBs or (y) other
institutional accredited investors (as defined in Rule 501(a) (1), (2), (3) or
(7) under the Securities Act) ("institutional accredited investors") that, prior
to their purchase of the Notes, deliver to such Placement Agent a letter
containing the representations and agreements set forth in Appendix A to the
Memorandum and (B) in the case of offers outside the United States, to persons
other than U.S. persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate or trust)) that, in
each case, in purchasing such Notes are deemed to have represented and agreed as
provided in the Final Memorandum under the caption "Transfer Restrictions."
(b) Each Placement Agent, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) it understands that no action has been or will be taken in any
jurisdiction by the Company that would permit a public offering of the
Notes, or possession or distribution of either Memorandum or any other
offering or publicity material relating to the Notes, in any country or
jurisdiction where action for that purpose is required;
<PAGE>
14
(ii) such Placement Agent will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells or
delivers Notes or has in its possession or distributes either Memorandum or
any such other material, in all cases at its own expense;
(iii) the Notes have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance
with Regulation S under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act;
(iv) such Placement Agent has offered the Notes and will offer and
sell the Notes (A) as part of its distribution at any time and (B)
otherwise until 40 days after the Closing Date, only in accordance with
Rule 903 of Regulation S or another exemption from the registration
requirements of the Securities Act. Accordingly, neither such Placement
Agent, its Affiliates nor any persons acting on its or their behalf have
engaged or will engage in any directed selling efforts (within the meaning
of Regulation S) with respect to the Notes, and any such Placement Agent,
its Affiliates and any such persons have complied and will comply with the
offering restrictions requirements of Regulation S;
(v) such Placement Agent has (A) not offered or sold and, during
the period of six months from the date hereof, will not offer or sell any
Notes to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995 (the "Regulations"); (B)
complied and, during the period of six months from the date hereof, will
comply with all applicable provisions of the Financial Services Act 1986
and the Regulations with respect to anything done by it in relation to the
Notes in, from or otherwise involving the United Kingdom; and (C) only
issued or passed on and, during the period of six months from the date
hereof, will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the Notes if that
person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person
to whom such document may otherwise lawfully be issued or passed on;
(vi) such Placement Agent understands that the Notes have not been
and will not be registered under the Securities and Exchange Law of Japan,
and represents that it has not offered or sold, and agrees that it will not
offer or sell, any Notes, directly or
<PAGE>
15
indirectly in Japan or to any resident of Japan except (A) pursuant to an
exemption from the registration requirements of the Securities and Exchange
Law of Japan and (B) in compliance with any other applicable requirements
of Japanese law; and
(vii) such Placement Agent agrees that, at or prior to confirmation
of sales of the Notes, it will have sent to each distributor, dealer or
person receiving a selling concession, fee or other remuneration that
purchases Notes from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Notes covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the closing date, except
in either case in accordance with Regulation S (or Rule 144A, if
available) under the Securities Act. Terms used above have the
meaning given to them by Regulation S."
Terms used in this Section 6 have the meanings given to them by Regulation S.
7. Indemnification and Contribution. (a) Each member of the
--------------------------------
Group agrees to indemnify and hold harmless each Placement Agent, and each
person, if any, who controls such Placement Agent within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under
common control with, or is controlled by, such Placement Agent, from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Placement
Agent or any such controlling of affiliated person in connection with defending
or investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if ITC shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Placement Agent furnished to ITC in writing by such
Placement Agent through you expressly for use therein; provided, however, that
-------- -------
the foregoing indemnity agreement with respect to a Memorandum shall not inure
to the benefit of any Placement Agent (or any other person indemnified pursuant
to this paragraph (a)) to the extent that any such losses, claims, damages or
liabilities result from the fact that such Placement Agent sold securities to a
person to whom there was not sent or given by or on behalf of such Placement
Agent a copy of the Final Memorandum at or prior to the written confirmation of
the sale of the Notes to such person, and if the losses, claims, damages or
liabilities result from an untrue statement or alleged
<PAGE>
16
untrue statement or an omission or alleged omission contained in the Preliminary
Memorandum that was corrected in the Final Memorandum.
(b) Each Placement Agent agrees, severally and not jointly, to
indemnify and hold harmless each member of the Group, their respective directors
and officers and each person, if any, who controls any member of the Group
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the members
of the Group to such Placement Agent, but only with reference to information
relating to such Placement Agent furnished to ITC in writing by such Placement
Agent through you expressly for use in either Memorandum or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) of this Section 7 above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred. Such firm
shall be designated in writing by Morgan Stanley & Co. Incorporated in the case
of parties indemnified pursuant to paragraph (a) of this Section 7 above and by
ITC in the case of parties indemnified pursuant to paragraph (b) of this
Section 7 above. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
<PAGE>
17
entered into more than 60 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 7 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Group, on the one hand, and the Placement Agents, on the other hand, from the
offering of such Notes or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Group on the one hand and the Placement Agents on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Group on the one hand and
the Placement Agents on the other hand in connection with the offering of such
Notes shall be deemed to be in the same respective proportions as the net
proceeds from the offering of such Notes (before deducting expenses) received by
ITC and the total discounts and commissions received by the Placement Agents in
respect thereof bear to the aggregate offering price of such Notes. The relative
fault of the Group on the one hand and of the Placement Agents on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Group or by the
Placement Agents and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Placement Agents' respective obligations to contribute pursuant to this
Section 7 are several in proportion to the respective principal amount of Notes
they have purchased hereunder, and not joint.
(e) The Group and the Placement Agents agree that it would not be
just or equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Placement Agents were treated as one entity for
- --- ----
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
<PAGE>
18
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Placement Agent shall be required to contribute any amount in
excess of the amount by which the total price at which the Notes resold by it in
the initial placement of such Notes were offered to investors exceeds the amount
of any damages that such Placement Agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution provisions contained in this Section 7
and the representations and warranties of the Group contained in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Placement Agents or any person controlling the Placement Agents or by or on
behalf of the Group, any of their respective officers or directors or any person
controlling any member of the Group and (iii) acceptance of and payment for any
of the Notes. The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
<PAGE>
19
8. Termination. This Agreement shall be subject to termination by
-----------
notice given by you to ITC, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event singly or
together with any other such event makes it, in your judgment, impracticable to
market the Notes on the terms and in the manner contemplated in the Final
Memorandum.
9. Miscellaneous. If, on the Closing Date, any one or more of the
-------------
Placement Agents shall fail or refuse to purchase Notes that it or they have
agreed to purchase hereunder on such date, and the aggregate principal amount of
Notes which such defaulting Placement Agent or Placement Agents agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Notes to be purchased on such date, the other Placement
Agents shall be obligated severally in the proportions that the principal amount
of Notes set forth opposite their respective names in Schedule I bears to the
aggregate principal amount of Notes set forth opposite the names of all such
non-defaulting Placement Agents, or in such other proportions as you may
specify, to purchase the Notes which such defaulting Placement Agent or
Placement Agents agreed but failed or refused to purchase on such date; provided
--------
that in no event shall the principal amount of Notes that any Placement Agent
has agreed to purchase pursuant to Section 3 be increased pursuant to this
Section 9 by an amount in excess of one-ninth of such principal amount of Notes
without the written consent of such Placement Agent. If, on the Closing Date,
any Placement Agent or Placement Agents shall fail or refuse to purchase Notes
which it or they have agreed to purchase hereunder on such date and the
aggregate principal amount of Notes with respect to which such default occurs is
more than one-tenth of the aggregate principal amount of Notes to be purchased
on such date and arrangements satisfactory to you and ITC for the purchase of
such Notes are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Placement Agent or
of the Company. In any such case either you or ITC shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Final Memorandum or in any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Placement Agent from liability in
respect of any default of such Placement Agent under this Agreement.
<PAGE>
20
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
If this Agreement shall be terminated by the Placement Agents, or any
of them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Placement Agents or such Placement
Agents as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Placement Agents in connection
with this Agreement or the offering contemplated hereunder.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
The headings of the sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed a part of this Agreement.
<PAGE>
21
Please confirm your agreement to the foregoing by signing in the space
provided below for that purpose and returning to us a copy hereof, whereupon
this Agreement shall constitute a binding agreement between us.
Very truly yours,
ITC/\DeltaCom, Inc.
By /s/ Andrew Walker
------------------------------
Name: Andrew Walker
Title: Chief Executive Officer
ITC Holding Company, Inc.
By /s/ Campbell B. Lancer, III
------------------------------
Name: Campbell B. Lancer, III
Title: Chairman
DeltaCom, Inc.
By /s/ Andrew Walker
------------------------------
Name: Andrew Walker
Title: Chief Executive Officer
Eastern Telecom, Inc.
By /s/ Andrew Walker
------------------------------
Name: Andrew Walker
Title: Chief Executive Officer
Interstate FiberNet
By ITC Transmission Systems, Inc.,
its General Partner
By /s/ Andrew Walker
------------------------------
Name: Andrew Walker
Title: Chief Executive Officer
<PAGE>
22
Gulf States Transmission Systems, Inc.
By /s/ Andrew Walker
-----------------------
Name: Andrew Walker
Title: Chief Executive Officer
ITC Transmission Systems, Inc.
By /s/ Andrew Walker
-----------------------
Name: Andrew Walker
Title: Chief Executive Officer
ITC Transmission Systems II, Inc.
By /s/ Andrew Walker
-----------------------
Name: Andrew Walker
Title: Chief Executive Officer
Agreed as of the date first above written
Morgan Stanley & Co. Incorporated
Acting severally on behalf
of itself and the several
Placement Agents named herein.
By Morgan Stanley & Co. Incorporated
By /s/ Robert Shepardson
-------------------------
Name: Robert Shepardson
Title: Principal
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount at
Maturity of Notes
Placement Agent To Be Purchased
--------------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated $130,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 40,000,000
First Union Capital Markets Corp. 20,000,000
NationsBanc Capital Markets, Inc. 10,000,000
------------
Total............................... $200,000,000
============
</TABLE>
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
ITC/\DELTACOM, INC.
1. NAME.
The name of the corporation is ITC/\DeltaCom, Inc. (the
"Corporation").
2. REGISTERED OFFICE AND AGENT.
The registered office of the Corporation shall be located at 1013
Centre Road, Wilmington, Delaware 19805 in the County of New Castle. The
registered agent of the Corporation at such address shall be Corporation Service
Company.
3. PURPOSE AND POWERS.
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware as from time to time amended (the "Delaware General
Corporation Law"). The Corporation shall have all power necessary or helpful to
engage in such acts and activities.
4. CAPITAL STOCK.
4.1. Authorized Shares; Increase in Authorized Shares.
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 95,000,000 shares, of which
60,000,000 shares shall be classified as shares of Class A Common Stock, with a
par value of $0.01 per share ("Class A Common Stock"), 30,000,000 shares shall
be classified as shares of Class B Common Stock, par value $0.01 per share
("Class B Common Stock"), and 5,000,000 shares shall be classified as shares of
Preferred Stock, with a par value of $0.01 per share ("Preferred Stock"). The
Class A Common Stock and Class B Common Stock are sometimes referred to
collectively herein as the "Common Stock." The Board of Directors expressly is
authorized to provide for the issuance of shares of Preferred Stock in one or
more series without the approval of the stockholders of the Corporation. The
number of authorized shares of any class of stock of the Corporation may be
increased or decreased (but not below the number of shares thereof) by the
affirmative vote of the holders of a majority of the capital stock of the
Corporation entitled to vote (irrespective of the right to vote thereupon as a
class that the holders of the shares of any such class would otherwise be
entitled to under Section 242(b)(2) of the Delaware General Corporation Law).
<PAGE>
4.2. Common Stock.
4.2.1. Relative Rights.
The Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of the Preferred Stock as set forth in the
certificates of designations filed to establish the respective series of
Preferred Stock. Except as provided in this Section 4.2, hereof, each share of
Class A Common Stock and Class B Common Stock shall have the same relative
rights and be identical in all respects as to all matters.
4.2.2. Voting Rights.
Each holder of shares of Class A Common Stock and each holder of
shares of Class B Common Stock shall be entitled to attend all special and
annual meetings of the stockholders of the Corporation. On all matters on which
stockholders are entitled or permitted to vote, every holder of Class A Common
Stock shall be entitled to cast one vote in person or by proxy for each
outstanding share of Class A Common Stock held of record by such holder, and
every holder of Class B Common Stock shall be entitled to cast ten votes in
person or by proxy for each outstanding share of Class B Common Stock held of
record by such holder. Except as otherwise provided in this Certificate of
Incorporation or by applicable law, the holders of shares of Class A Common
Stock and Class B Common Stock shall vote together as a single class, subject to
any voting rights that may be granted to holders of Preferred Stock.
4.2.3. Dividends.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of shares of any class of stock having preference over
the Common Stock as to the payment of dividends, the full amount of dividends
and of sinking fund or retirement payments, if any, to which such holders are
respectively entitled in preference to the Common Stock, then the holders of
record of the Class A Common Stock and Class B Common Stock, and any class or
series of stock entitled to participate therewith as to dividends, shall be
entitled to receive dividends, when, as, and if declared by the Board of
Directors, out of any assets legally available for the payment of dividends
thereon; provided, however, that no dividend may be declared and paid to the
-----------------
holders of the Class A Common Stock unless at the same time the Board of
Directors shall also declare and pay to the holders of the Class B Common Stock
a per-share dividend equal to and, subject to the next sentence, in the same
form as the dividend declared and paid to the holders of the Class A Common
Stock; and provided, further, that no dividend may be declared and paid to the
-----------------
holders of the Class B Common Stock unless at the same time the Board of
Directors shall also declare and pay to the holders of the Class A Common Stock
a per-share dividend equal to and, subject to the next sentence, in the same
form as the dividend declared and paid to the holders of the Class B Common
Stock. Common Stock dividends declared on Class A Common Stock shall be payable
in Class A Common Stock; Common Stock dividends declared on Class B Common Stock
shall be payable in Class B Common Stock.
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<PAGE>
4.2.4. Dissolution, Liquidation, Winding Up.
In the event of any dissolution, liquidation or winding up of the
Corporation (whether voluntary or involuntary), the holders of record of the
Class A Common Stock and the Class B Common Stock then outstanding, and all
holders of any class or series of stock entitled to participate (in whole or in
part) therewith as to distribution of assets, shall become entitled to
participate equally on a per-share basis in the distribution of any assets of
the Corporation remaining after the Corporation shall have paid or provided for
payment of all debts and liabilities of the Corporation, and shall have paid (or
set aside for payment) to the holders of any class or series of stock having
preference over the Common Stock in the event of dissolution, liquidation or
winding up, the full preferential amounts (if any) to which they are entitled.
4.2.5. Conversion of Class B Common Stock.
4.2.5.(a) Conversion at Option of Holder.
Each outstanding share of Class B Common Stock may, at the option of
the holder thereof, at any time, be converted into one fully paid and non-
assessable share of Class A Common Stock, in accordance with Section 4.2.5(d)
hereof.
4.2.5.(b) Conversion on Transfer of Shares and Rights.
Except as otherwise provided in Section 4.2.5(c) hereof, upon any
Transfer (as defined in Section 4.2.5(i)) of shares of Class B Common Stock, of
rights, options or warrants to purchase Class B Common Stock, or of securities
convertible into or exchangeable for shares of Class B Common Stock, in each
case to any Person or Persons other than a holder of Class B Common Stock who,
prior to such Transfer, Beneficially Owns voting securities or voting interests
having votes exceeding 50% of the votes of all of the then outstanding voting
securities or voting interests, such shares of Class B Common Stock shall
automatically convert into an identical number of shares of Class A Common Stock
(with the same rights and restrictions as shares of Class A Common Stock
generally), and such rights, options, warrants or convertible or exchangeable
securities shall automatically convert into rights, options or warrants to
purchase an identical number of shares of Class A Common Stock or securities
convertible into or exchangeable for an identical number of shares of Class A
Common Stock (otherwise with terms identical to the rights, options, warrants or
convertible or exchangeable securities that so automatically convert), in each
case, without any further action on the part of the Corporation or any other
Person, and the certificates representing such shares, rights, options, warrants
or convertible or exchangeable securities shall be deemed to represent an
identical number of shares of Class A Common Stock, or to represent rights,
options or warrants to purchase an identical number of shares of Class A Common
Stock or to represent securities convertible into or exchangeable for an
identical number of shares of Class A Common Stock, as the case may be.
4.2.5.(c) Certain Transfers of Class B Common Stock.
Notwithstanding Section 4.2.5(b) hereof, if ITC or an ITC Company
effects, in a single transaction or in a series of related transactions
completed substantially
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<PAGE>
concurrently, a Transfer of shares of Class B Common Stock having votes
exceeding 50% of the votes of all of the voting securities of the Corporation
outstanding prior to completion of such Transfer (including all of the
outstanding shares of Class B Common Stock at such time) to one Person (other
than an underwriter of such stock in connection with a bona fide underwriting of
such stock), or group of Affiliated Persons, such shares of Class B Common Stock
so transferred shall not convert into shares of Class A Common Stock upon such
Transfer. Any shares of Class B Common Stock retained by the transferor
following any such Transfer pursuant to this Section 4.2.5(c) (other than a
Transfer to an Affiliate of the transferor) shall automatically convert into
shares of Class A Common Stock upon such Transfer without any further action by
the Corporation or any other Person.
4.2.5.(d) Conversion Procedure.
In the event of any conversion of shares of Class B Common Stock, the
holder of such shares shall promptly surrender the certificate or certificates
therefor, at the office of the Corporation, or of any transfer agent for such
shares, and shall give written notice to the Corporation (the "Notice"), at such
office: (i) stating that shares of Class B Common Stock have been, or are to be,
as the case may be, converted into shares of Class A Common Stock as provided in
this Section 4.2.5; (ii) specifying whether the conversion is to occur pursuant
to Section 4.2.5(a) or has occurred pursuant to Section 4.2.5(b) or (c) hereof;
(iii) stating the number of shares of Class B Common Stock that have been or are
to be converted; and (iv) setting out the name or names (with addresses) and
denominations in which the certificate or certificates for shares of Class A
Common Stock and, if applicable, the name or names (with addresses) and
denominations in which the certificate or certificates for shares of Class B
Common Stock not so converted, shall be issued, with instructions for delivery
thereof. After receipt of such certificates and the Notice, the Corporation or
its agent shall as promptly as practicable issue and deliver in accordance with
the Notice a certificate or certificates representing the shares of Class A
Common Stock to which such holder is entitled, registered in the name of such
holder or designee as specified in the Notice, and shall issue and deliver to
the holder of Class B Common Stock a certificate or certificates representing
the shares of Class B Common Stock, if any, to which such holder remains
entitled, registered in the name of such holder or designee as specified in the
Notice. The Corporation shall use all reasonable efforts to reflect on its
books and records and otherwise give effect to a conversion pursuant to Section
4.2.5(b) or (c), hereof, notwithstanding any failure by the holder to deliver to
the Corporation the Notice or the certificates representing the shares subject
to such conversion.
4.2.5.(e) Time and Effect of Conversion.
Each conversion of Class B Common Stock (or of rights, options or
warrants to purchase Class B Common Stock or securities convertible into or
exchangeable for Class B Common Stock) effected pursuant to this Section 4.2.5
hereof shall be deemed to have been effected (in each case, the "Conversion
Time") as follows: (i) with respect to conversions pursuant to Section 4.2.5(a)
hereof, as of the close of business on the date on which the certificate or
certificates representing the shares of Class B Common Stock to be converted
have been surrendered and (ii) with respect to conversions pursuant to Section
4.2.5(b) or Section 4.2.5(c) hereof, as of the close of business on the date on
which the Transfer described in Section 4.2.5(b) or Section 4.2.5(c) hereof, as
the case may be, shall have been completed. At the Conversion Time, the rights
of the holder of
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<PAGE>
such shares of Class B Common Stock as such holder shall cease, and the Person
or Persons in whose name or names any certificate or certificates for shares of
Class A Common Stock are to be issued upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Class A Common
Stock represented thereby, which Class A Common Stock shall be deemed to have
been issued as of such time, in each case notwithstanding any failure by the
holder to deliver to the Corporation the Notice specified in Section 4.2.5(d),
or the certificates representing the shares subject to conversion, or the
Corporation's failure to issue to the holder certificates representing the
shares to be held after the conversion has been effected. All shares of Class B
Common Stock converted hereunder shall be retired and canceled and shall be
restored to the status of authorized but unissued shares of Class B Common
Stock.
4.2.5.(f) Reservation of Shares of Class A Common Stock.
The Corporation shall at all times reserve and keep available, out of
its authorized and unissued shares of Class A Common Stock, for the purposes of
effecting conversions, such number of duly authorized shares of Class A Common
Stock as shall from time to time be sufficient to effect the conversion of the
Class B Common Stock contemplated herein. All such shares so issuable shall,
when so issued, be duly and validly issued, fully paid and non-assessable, and
free from liens and charges with respect to the issue. The Corporation will
take all such reasonable action as may be necessary to ensure that all such
shares may be so issued without violation of any applicable law or regulation,
or of any requirements of any national securities exchange or The Nasdaq Stock
Market's National Market upon which such shares may be listed or traded.
4.2.5.(g) Subdivisions and Combinations of Shares.
If the Corporation in any manner subdivides (by any stock split,
reclassification, recapitalization or otherwise) or combines the outstanding
shares of one class of Common Stock at a time when shares of the other class of
Common Stock are outstanding, the outstanding shares of the other class of
Common Stock will be likewise subdivided or combined.
4.2.5.(h) Merger or Consolidation.
In the event of a merger or consolidation of the Corporation with or
into another entity (whether or not the Corporation is the surviving entity),
the holders of each share of Class A Common Stock and Class B Common Stock shall
be entitled to receive (i) the same per share consideration as the per share
consideration, if any, received by the holders of each share of such other class
of stock, or (ii) per share consideration in the form a share of stock that is
substantially similar as to voting, dividend and, if any, liquidation rights as,
in the case of holders of Class A Common Stock, a shares of Class A Common Stock
and; in the case of holders of Class B Common Stock, a share of Class B Common
Stock.
4.2.5.(i) Certain Definitions.
As used in this Certificate of Incorporation, the terms set forth
below shall have the following meanings:
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<PAGE>
"Affiliate" of, or "Affiliated" with, a specified Person, means a
Person that directly or indirectly Controls (as defined in this Section 4) or is
Controlled by , or is under common Control with, the Person specified.
"Beneficial Ownership" (including the terms "Beneficially Owns,"
"Beneficially Owned" or "Beneficial Owner") of voting securities or voting
interests of a specified Person means ownership by a Person who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares the voting power (which includes the power to vote or
to direct the voting) of such voting securities or voting interests.
"Control" (including the terms "Controlling," "Controlled by" and
"under common Control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the Beneficial Ownership of voting securities, by
contract or otherwise.
"ITC" shall mean ITC Holding Company, Inc., a Delaware corporation.
"ITC Company" shall mean an Affiliate of ITC, or a Person that
succeeds, directly or indirectly, to the ownership of the business or of all or
substantially all of the assets and liabilities or ITC voting securities having
voting power sufficient to provide the owner thereof with Control of ITC,
whether by merger (including, without limitation, by formation of a holding
company), transfer of assets or otherwise.
"Person" shall include, without limitation, a corporation, a trust, a
limited liability company, an association, a partnership, a joint venture, an
organization, a business, an individual, a government or a subdivision thereof
or a governmental agency.
"Transfer" shall include a sale, gift, mortgage, pledge, exchange,
assignment or other disposition of Beneficial Ownership (including, without
limitation, foreclosure on a pledge, grant of security interest or other
encumbrance permitted by clause (ii) below), but shall not include the
following: (i) an issuance of securities by the Corporation; (ii) a pledge,
grant of security interest or other encumbrance effected in a bona fide
transaction with a pledgee that is not Affiliated with the transferor; (iii) a
transfer (other than by an individual) (A) to a Person (or simultaneous
transfers in partial or complete liquidation to or for the benefit of the
Persons, if no more than five in number) that Beneficially Owns voting
securities or voting interests having votes exceeding 80% of the votes of all of
then outstanding voting securities or voting interests of the transferor or (B)
to a Person of which the transferor Beneficially Owns voting securities or
voting interests having votes exceeding 80% of the votes of all of then
outstanding voting securities or voting interests of such Person; or (iv) if the
transferor is an individual, a transfer to members of the transferor's immediate
family, or to trustees or custodians for their benefit. For purposes of the
preceding sentence, "immediate family" shall be deemed to include only the
transferor's spouse, children and grandchildren.
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<PAGE>
4.3. Preferred Stock.
4.3.1. Issuance, Designations, Powers, Etc.
The Board of Directors expressly is authorized, subject to limitations
prescribed by the Delaware General Corporation Law and the provisions of this
Certificate of Incorporation, to provide (by resolution and by filing a
certificate of designations pursuant to the Delaware General Corporation Law)
for the issuance from time to time of the shares of Preferred Stock in one or
more series, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and other
rights of the shares of each such series and to fix the qualifications,
limitations and restrictions thereon, including, but without limiting the
generality of the foregoing, the following:
(i) the number of shares constituting that series and the
distinctive designation of that series;
(ii) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;
(iii) whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting rights;
(iv) whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
(v) whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(viii) any other relative powers, preferences, and rights of that
series, and qualifications, limitations or restrictions on that series.
4.3.2. Dissolution, Liquidation, Winding Up.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Preferred Stock of
each series shall be entitled to receive only such amount or amounts as shall
have been fixed by the certificate of designations or by the resolution or
resolutions of the Board of Directors providing for the issuance of such series.
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<PAGE>
4.4. Redemption.
Notwithstanding any other provision of this Certificate of
Incorporation to the contrary, outstanding shares of stock of the Corporation
shall always be subject to redemption by the Corporation, by action of the Board
of Directors, if in the judgment of the Board of Directors such action should be
taken, pursuant to Section 151(b) of the Delaware General Corporation Law or any
other applicable provision of law, to the extent necessary to prevent the loss
or secure the reinstatement of any license or franchise from any governmental
agency held by the Corporation or any of its subsidiaries to conduct any portion
of the business of the Corporation or any of its subsidiaries, which license or
franchise is conditioned upon some or all of the holders of the Corporation's
stock possessing prescribed qualifications. The terms and conditions of such
redemption shall be as follows:
(a) The redemption price of the shares to be redeemed pursuant to
this Section 4.4 shall be determined by the Board of Directors and shall be
equal to the Fair Market Value (as defined herein) of such shares or, if such
shares were purchased by one or more Disqualified Holders (as defined herein)
within one year of the Redemption Date (as defined herein), the lesser of (i)
the Fair Market Value of such shares and (ii) the purchase price paid by such
Disqualified Holder for such shares.
(b) At the election of the Corporation, the redemption price of
such shares may be paid in cash, Redemption Securities (as defined herein) or
any combination thereof.
(c) If fewer than all shares held by Disqualified Holders are to be
redeemed, the shares to be redeemed shall be selected in such manner as shall be
determined by the Board of Directors, which may include selection first of the
most recently purchased shares thereof, selection by lot or selection in any
other manner determined by the Board of Directors.
(d) At least 30 days' prior written notice of the Redemption Date
shall be given to any Disqualified Holder of shares selected to be redeemed
(unless waived in writing by any such holder), provided that the Redemption Date
may be the date on which written notice shall be given to such holder if the
cash or Redemption Securities necessary to effect the redemption shall have been
deposited in trust for the benefit of such holder and subject to immediate
withdrawal by it upon surrender of the stock certificates for the shares to be
redeemed.
(e) From and after the Redemption Date, any and all rights of
whatever nature that any Disqualified Holder may have with respect to any shares
selected for redemption (including without limitation any rights to vote or
participate in dividends declared on stock of the same class or series as such
shares) shall cease and terminate, and such Disqualified Holder shall
thenceforth be entitled only to receive, with respect to such shares, the cash
or Redemption Securities payable upon redemption.
(f) The Board of Directors may also impose additional terms and
conditions.
(g) For purposes of this Section 4.4:
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<PAGE>
(i) "Disqualified Holder" shall mean any holder of shares of stock
of the Corporation whose holding of such stock, either
individually or when taken together with the holding of shares
of stock of the Corporation by any other holders, may result,
in the judgment of the Board of Directors, in the loss of, or
the failure to secure the reinstatement of, any license or
franchise from any governmental agency held by the Corporation
or any of its subsidiaries to conduct any portion of the
business of the Corporation or any of its subsidiaries.
(ii) "Fair Market Value" of a share of the Corporation's stock of
any class or series shall mean the average Closing Price (as
defined herein) for such a share for each of the 45 most
recent days on which shares of stock of such class or series
shall have been traded preceding the day on which notice of
redemption shall be given pursuant to paragraph (d) of this
Section 4.4; provided, however, that if shares of stock of
-----------------
such class or series are not traded on any securities exchange
or in the over-the-counter market, "Fair Market Value" shall
be determined by the Board of Directors in good faith.
"Closing Price" on any day means the reported closing sales
price or, in case no such sale takes place, the average of the
reported closing bid and asked prices on the principal United
States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest
closing sales price or bid quotation for such stock on the
National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such
prices or quotations are available, the fair market value on
the day in question as determined by the Board of Directors in
good faith.
(iii) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the
Corporation pursuant to this Section 4.4.
(iv) "Redemption Securities" shall mean any debt or equity
securities of the Corporation, any of its subsidiaries or any
other corporations, or any combination thereof, having such
terms and conditions as shall be approved by the Board of
Directors and which, together with any cash to be paid as part
of the redemption price, in the opinion of any investment
banking firm selected by the Board of Directors (which may be
a firm which provides other investment banking, brokerage or
other services to the Corporation), has a value, at the time
notice of redemption is given pursuant to paragraph (d) of
this Section 4.4, at least equal to the price required to be
paid pursuant to paragraph (a) of this Section 4.4 (assuming
for purposes of such valuation, in the case of Redemption
Securities to be publicly traded, such Redemption
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<PAGE>
Securities were fully distributed and trading under normal
conditions).
5. INCORPORATOR; INITIAL DIRECTORS.
5.1. Incorporator.
The name and mailing address of the incorporator (the "Incorporator")
are ITC Holding Company, Inc., 1239 O.G. Skinner Drive, West Point, Georgia
31833. The powers of the Incorporator shall terminate upon the filing of this
Certificate of Incorporation.
5.2. Initial Directors.
The following persons, having the following mailing addresses, shall
serve as the directors of the Corporation until the first annual meeting of the
stockholders of the Corporation or until their successors are elected and
qualified:
<TABLE>
<CAPTION>
NAME CLASS MAILING ADDRESS
---- ----- ---------------
<S> <C> <C>
Campbell B. Lanier, III I 206 West 9th Street
West Point, Georgia 31833
Andrew M. Walker I 206 West 9th Street
West Point, Georgia 31833
William B. Timmerman I 206 West 9th Street
West Point, Georgia 31833
Robert A. Dolson II 206 West 9th Street
West Point, Georgia 31833
O. Gene Gabbard II 206 West 9th Street
West Point, Georgia 31833
William H. Scott, III II 206 West 9th Street
West Point, Georgia 31833
Donald W. Burton III 206 West 9th Street
West Point, Georgia 31833
Malcolm C. Davenport, V III 206 West 9th Street
West Point, Georgia 31833
William T. Parr III 206 West 9th Street
West Point, Georgia 31833
</TABLE>
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<PAGE>
6. BOARD OF DIRECTORS.
6.1. Classification.
Except as otherwise provided in this Certificate of Incorporation or a
certificate of designations relating to the rights of the holders of any series
of Preferred Stock, voting separately by series, to elect additional directors
under specified circumstances, the number of directors of the Corporation shall
be as fixed from time to time by or pursuant to the Bylaws of the Corporation.
The directors, other than those who may be elected by the holders of any series
of Preferred Stock voting separately by series, shall be classified, with
respect to the time for which they severally hold office, into three classes,
Class I, Class II and Class III, which shall be as nearly equal in number as
possible, and shall be adjusted from time to time in the manner specified in the
Bylaws of the Corporation to maintain such proportionality. Each initial
director in Class I shall hold office for a term expiring at the 2000 annual
meeting of stockholders, each initial director in Class II shall hold office for
a term expiring at the 1999 annual meeting of stockholders, and each initial
director in Class III shall hold office for a term expiring at the 1998 annual
meeting of stockholders.
Notwithstanding the foregoing provisions of this Section 6.1, each
director shall serve until such director's successor is duly elected and
qualified or until such director's earlier death, resignation or removal. At
each annual meeting of stockholders, the successors to the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election and until their successors have been duly elected and
qualified or until any such director's earlier death, resignation or removal.
Except as set forth below with respect to vacancies and newly created
directorships, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors.
6.2. Removal.
Except as otherwise provided pursuant to the provisions of this
Certificate of Incorporation or a certificate of designations relating to the
rights of the holders of any series of Preferred Stock, voting separately by
series, to elect directors under specified circumstances, any director or
directors may be removed from office at any time, but for cause and only by the
affirmative vote, at a special meeting of the stockholders called for such a
purpose, of not less than 66-2/3% of the total number of votes of the then
outstanding shares of stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, and only if notice of
such proposal was contained in the notice of such meeting. At least 30 days
prior to such special meeting of stockholders, written notice shall be sent to
the director or directors whose removal will be considered at such meeting. Any
vacancy in the Board of Directors resulting from any such removal or otherwise
shall be filled in accordance with Section 6.3 hereof.
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<PAGE>
6.3. Vacancies and Change of Authorized Number.
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the directors
then in office, although fewer than a quorum, or by a sole remaining director.
In the event that one or more directors resigns from the board, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have the power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective. Notwithstanding the foregoing, whenever the holders of any class or
classes of stock or series thereof are entitled to elect one or more directors
by the provisions of this Certificate of Incorporation, vacancies and newly
created directorships of such class or classes or series may be filled by a
majority of the directors elected by such class or classes or series thereof in
office, or by a sole remaining director so elected. Each director chosen in
accordance with this Section 6.3 shall hold office until the next election of
the class for which such director shall have been chosen, and until such
director's successor is elected and qualified, or until the director's earlier
death, resignation or removal.
6.4. Directors Elected by Holders of Preferred Stock.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation or a certificate of designations
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Section 6 unless expressly provided by the certificate
of designations.
6.5. Limitation of Liability.
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty as a
director; provided, however, that this provision shall not eliminate or limit
-----------------
the liability of a director: (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (b) for acts or omissions that
are not in good faith or that involve intentional misconduct or a knowing
violation of law; (c) for liability under Section 174 of the Delaware General
Corporation Law; or (d) for any transaction from which the director received any
improper personal benefit. Any repeal or modification of this Section 6.5 shall
be prospective only, and shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal or
modification.
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7. ACTIONS BY STOCKHOLDERS.
7.1. Action at Meetings or By Unanimous Consent.
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders, and may not be effected by any consent in writing by such
stockholders, unless such consent is unanimous.
7.2. Special Meetings of Stockholders.
Special meetings of the stockholders may be called at any time but
only by (a) the chairman of the board of the Corporation, or (b) a majority of
the directors in office, although less than a quorum.
8. AMENDMENT OF CERTIFICATE OF INCORPORATION.
Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), the affirmative vote of 66-2/3%
of the total number of votes of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal, or to adopt
any provision inconsistent with the purpose or intent of, Section 6 or Section 7
hereof, and this Section 8. Notice of any such proposed amendment, repeal or
adoption shall be contained in the notice of the meeting at which it is to be
considered. Subject to the provisions set forth herein, the Corporation
reserves the right to amend, alter, repeal or rescind any provision contained in
this Certificate of Incorporation in the manner now or hereafter prescribed by
law.
9. COMPROMISE OR ARRANGEMENTS.
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware General Corporation Law or
on the application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of
the Delaware General Corporation Law order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been
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<PAGE>
made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
10. AMENDMENT OF BYLAWS.
In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors is expressly authorized
and empowered to adopt, amend and repeal the Bylaws of the Corporation.
Notwithstanding any other provisions of this Certificate of Incorporation or the
Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage
may be specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation), the affirmative vote of 66-2/3% of the total number of votes of
the then outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend or repeal the Bylaws of the Corporation.
-14-
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the Incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
Delaware General Corporation Law, hereby certifies that the facts hereinabove
stated are truly set forth, and accordingly executes this Certificate of
Incorporation this 24th day of March, 1997.
ITC HOLDING COMPANY, INC., Incorporator
By: /s/ Kimberley E. Thompson
------------------------------------
Kimberley E. Thompson
Vice President, General Counsel
and Secretary
-15-
<PAGE>
Exhibit 3.2
BYLAWS
OF
ITC/\DELTACOM, INC.
1. OFFICES
1.1. Registered Office
The initial registered office of the Corporation shall be in
Wilmington, Delaware, and the initial registered agent in charge thereof shall
be Corporation Service Company.
1.2. Other Offices
The Corporation may also have offices at such other places, both
within and without the State of Delaware, as the Board of Directors may from
time to time determine or as may be necessary or useful in connection with the
business of the Corporation.
2. MEETINGS OF STOCKHOLDERS
2.1. Place of Meetings
All meetings of the stockholders shall be held at such place as may
be fixed from time to time by the Board of Directors, the Chairperson, the Chief
Executive Officer or the President.
2.2. Annual Meetings
The Corporation shall hold annual meetings of stockholders,
commencing with the year 1998, on such date and at such time as shall be
designated from time to time by the Board of Directors, the Chairperson, the
Chief Executive Officer or the President, at which stockholders shall elect
successors to that class of directors whose terms shall have expired and
transact such other business as may properly be brought before the meeting.
2.3. Special Meetings
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called at any time by (a) the
Chairperson or (b) a majority of the directors in office, although less than a
quorum.
<PAGE>
2.4. Notice of Meetings
Notice of any meeting of stockholders, stating the place, date and
hour of the meeting, and (if it is a special meeting) the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting (except to the extent that such notice is waived or is not
required as provided in the General Corporation Law of the State of Delaware
(the "Delaware General Corporation Law") or these Bylaws). Such notice shall be
given in accordance with, and shall be deemed effective as set forth in, Section
222 (or any successor section) of the Delaware General Corporation Law.
2.5. Waivers of Notice
Whenever the giving of any notice is required by statute, the
Certificate of Incorporation of the Corporation (which shall include any
amendments thereto and shall be hereinafter referred to as so amended as the
"Certificate of Incorporation") or these Bylaws, a waiver thereof, in writing
and delivered to the Corporation, signed by the person or persons entitled to
said notice, whether before or after the event as to which such notice is
required, shall be deemed equivalent to notice. Attendance of a stockholder at
a meeting shall constitute a waiver of notice (1) of such meeting, except when
the stockholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting, and (2) (if it is a special meeting) of
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the stockholder
objects to considering the matter at the beginning of the meeting.
2.6. Business at Special Meetings
Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice (except to the extent that such
notice is waived or is not required as provided in the Delaware General
Corporation Law or these Bylaws).
2.7. List of Stockholders
After the record date for a meeting of stockholders has been fixed,
at least ten days before such meeting, the officer who has charge of the stock
ledger of the Corporation shall make a list of all stockholders entitled to vote
at the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place in the city where the meeting
is to be held, which place is to be specified in the notice of the meeting, or
at the place where the meeting is to be held. Such list shall also, for the
duration of the meeting, be produced and kept open to the examination of any
stockholder who is present at the time and place of the meeting.
2.8. Quorum at Meetings
Stockholders may take action on a matter at a meeting only if a
quorum exists with respect to that matter. Except as otherwise provided by
statute or by the Certificate of
<PAGE>
Incorporation, the holders of a majority of the shares entitled to vote at the
meeting, and who are present in person or represented by proxy, shall constitute
a quorum at all meetings of the stockholders for the transaction of business.
Where a separate vote by a class or classes is required, a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter. Once a share is represented for any purpose at a meeting
(other than solely to object (1) to holding the meeting or transacting business
at the meeting, or (2) (if it is a special meeting) to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice), it is deemed present for quorum purposes for
the remainder of the meeting and for any adjournment of that meeting unless a
new record date is or must be set for the adjourned meeting. The holders of a
majority of the voting shares represented at a meeting, whether or not a quorum
is present, may adjourn such meeting from time to time.
2.9. Voting and Proxies
Unless otherwise provided in the Delaware General Corporation Law or
in the Certificate of Incorporation, and subject to the other provisions of
these Bylaws, each holder of Class A Stock shall be entitled to one vote, each
holder of Class B Stock shall be entitled to ten votes and all other
stockholders shall be entitled to one vote on each matter, in person or by
proxy, for each share of the Corporation's capital stock that has voting power
and that is held by such stockholder. No proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A duly executed appointment of proxy shall be irrevocable if the appointment
form states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power.
2.10. Required Vote
When a quorum is present at any meeting of stockholders, all matters
(other than the election of directors) shall be determined, adopted and approved
by the affirmative vote (which need not be by ballot) of a majority of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote with respect to the matter, unless the proposed action is one
upon which, by express provision of the Delaware General Corporation Law or of
the Certificate of Incorporation, a different vote is specified and required, in
which case such express provision shall govern and control with respect to that
vote on that matter. Where a separate vote by a class or classes is required,
the affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class, unless the proposed action is one upon which, by express
provision of the Delaware General Corporation Law or of the Certificate of
Incorporation, a different vote is specified and required, in which case such
express provision shall govern and control with respect to that vote on that
matter. Notwithstanding the foregoing, directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors.
2.11. Action Without a Meeting
Any action required or permitted to be taken by the stockholders of
the Corporation at a duly called annual or special meeting of stockholders may
be effected without
<PAGE>
a meeting, without prior notice and without a vote, but only if the action is
effected by one or more unanimous written consents of the stockholders entitled
to take such action, and the writing or writings are delivered to the
Corporation within sixty days of the delivery to the Corporation of the earliest
dated consent. All such consents shall be included in the Minute Book of the
Corporation.
3. DIRECTORS
3.1. Powers
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things, subject to any
limitation set forth in the Certificate of Incorporation or as otherwise may be
provided in the Delaware General Corporation Law.
3.2. Number and Election; Classes
The number of directors which shall constitute the whole board shall
not be fewer than five nor more than fifteen. The first board shall consist of
9 members. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the Board of Directors. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Section 3.4 hereof, and each director elected shall hold office
until such director's successor is elected and qualified or until the director's
earlier death, resignation or removal. Directors need not be stockholders.
Unless otherwise provided in the Certificate of Incorporation, the Board of
Directors shall divide the directors into three classes; and, when the number of
directors is changed, shall determine the class or classes to which the
increased or decreased number of directors shall be apportioned; provided,
--------
however, that no decrease in the number of directors shall affect the term of
- -------
any director then in office. At each annual meeting of stockholders, directors
elected to succeed those whose terms are expiring shall be elected for a term of
office expiring at the annual meeting of stockholders held in the third year
following their election and until their respective successors are elected and
qualified, or until such director's earlier death, resignation or removal.
3.3. Nomination of Directors
Only persons who are nominated in accordance with the procedures set
forth in this Section 3.3 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 3.3. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder notice
shall be delivered to or mailed and received at the principal executive office
of the Corporation not less than sixty days prior to the meeting; provided,
however, that in the event that less than seventy-five days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the fifteenth day
<PAGE>
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or re-
election as a director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Corporation's stock which
are beneficially owned by such person, and (iv) any other information relating
to such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to be named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the class and number of
shares of the Corporation's stock which are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in the
stockholder's notice of nomination which pertains to the nominee. No later than
the tenth day following the date of receipt of a stockholder nomination
submitted pursuant to this Section 3.3, the Chairman of the Board of Directors
of the Corporation shall, if the facts warrant, determine and notify in writing
the stockholder making such nomination that such nomination was not made in
accordance with the time limits and/or other procedures prescribed by the
bylaws. If no such notification is mailed to such stockholder within such ten-
day period, such nomination shall be deemed to have been made in accordance with
the provisions of this Section 3.3. No person shall be eligible for election as
a director of the Corporation unless nominated in accordance with the procedures
set forth in this Section 3.3.
3.4. Vacancies
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the directors
then in office, although fewer than a quorum, or by a sole remaining director.
Whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the provisions of the Certificate of
Incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof in office, or by a sole remaining director so
elected. Each director so chosen shall hold office until the next election of
directors, and until such director's successor is elected and qualified, or
until the director's earlier death, resignation or removal. In the event that
one or more directors resigns from the board, effective at a future date, a
majority of the directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
director so chosen shall hold office until the next election of directors, and
until such director's successor is elected and qualified, or until the
director's earlier death, resignation or removal.
<PAGE>
3.5. Meetings
3.5.1. Regular Meetings
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors.
3.5.2. Special Meetings
Special meetings of the Board of Directors may be called by the
Chairperson, the Chief Executive Officer or the President on one day's notice.
At least one day's notice of special meetings of the Board of Directors shall be
provided to each director, either personally or by telephone, express delivery
service (so that the scheduled delivery date of the notice is at least one day
in advance of the meeting), telegram or facsimile transmission. At least five
days' notice of special meetings of the Board of Directors shall be provided by
first-class mail (effective upon deposit of such notice in the mail). The
notice need not describe the purpose of a special meeting.
3.5.3. Telephone Meetings
Members of the Board of Directors may participate in a meeting of the
Board of Directors by any communication by means of which all participating
directors can simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
3.5.4. Action Without Meeting
Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if the action is taken by all
members of the Board of Directors. The action must be evidenced by one or more
written consents describing the action taken, signed by each director, and
delivered to the Corporation for inclusion in the Minute Book of the
Corporation.
3.5.5. Waiver of Notice of Meeting
A director may waive any notice required by statute, the Certificate
of Incorporation or these Bylaws before or after the date and time stated in the
notice. Except as set forth below, the waiver must be in writing, signed by the
director entitled to the notice, and delivered to the Corporation for inclusion
in the Minute Book of the Corporation. Notwithstanding the foregoing, a
director's attendance at or participation in a meeting waives any required
notice to the director of the meeting unless the director at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting.
3.6. Quorum and Vote at Meetings
At all meetings of the board, a quorum of the Board of Directors
consists of a majority of the total number of directors prescribed pursuant to
Section 3.2 of these Bylaws. The vote of a majority of the directors present at
any meeting at which there is a quorum shall
<PAGE>
be the act of the Board of Directors, except as may be otherwise specifically
provided by statute or by the Certificate of Incorporation or by these Bylaws.
3.7. Committees of Directors
The Board of Directors may by resolution create one or more
committees and appoint members of the Board of Directors to serve on the
committees at the pleasure of the Board of Directors. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. If a member of a
committee shall be absent from any meeting, or disqualified from voting thereat,
the remaining member or members present and not disqualified from voting,
whether or not such member or members constitute a quorum, may, by unanimous
vote, appoint another member of the Board of Directors to act at the meeting in
the place of such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors pursuant to Section 151(a) of the
Delaware General Corporation Law, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement of merger or
consolidation pursuant to Sections 251 or 252 of the Delaware General
Corporation Law, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the bylaws; and unless the Board resolution appointing
the Committee, these bylaws or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors, when required. Unless otherwise specified in the board
resolution appointing the Committee, all provisions of the Delaware General
Corporation Law and these Bylaws relating to meetings, action without meetings,
notice (and waiver thereof), and quorum and voting requirements of the Board of
Directors apply, as well, to such committees and their members.
3.8. Compensation of Directors
The Board of Directors shall have the authority to fix the
compensation of directors. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
<PAGE>
4. OFFICERS
4.1. Positions
The officers of the Corporation shall be a President, a Secretary and
a Treasurer, and such other officers as the Board of Directors (or an officer
authorized by the Board of Directors) from time to time may appoint, including a
Chairperson, a Chief Executive Officer, a Chief Financial Officer and one or
more Vice Chairmen, Senior Vice Presidents, Vice Presidents, Assistant
Secretaries and Assistant Treasurers. Each such officer shall exercise such
powers and perform such duties as shall be set forth below and such other powers
and duties as from time to time may be specified by the Board of Directors or by
any officer(s) authorized by the Board of Directors to prescribe the duties of
such other officers. Any number of offices may be held by the same person,
except that in no event shall the President and the Secretary be the same
person. Each of the Chairperson, Chief Executive Officer, Chief Financial
Officer, President, and/or any Vice President may execute bonds, mortgages and
other documents under the seal of the Corporation, except where required or
permitted by law to be otherwise executed and except where the execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation.
4.2. Chairperson
The Chairperson shall (when present) preside at all meetings of the
Board of Directors and stockholders, and shall ensure that all orders and
resolutions of the Board of Directors and stockholders are carried into effect.
The Chairperson may execute bonds, mortgages and other contracts, under the seal
of the Corporation, if required, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation.
4.3. Chief Executive Officer
In the absence of the Chairperson, or if no Chairperson shall have
been appointed, the Chief Executive Officer shall (when present) preside at all
meetings of the Board of Directors and stockholders, and shall ensure that all
orders and resolutions of the Board of Directors and stockholders are carried
into effect. The Chief Executive Officer may execute bonds, mortgages and other
contracts, under the seal of the Corporation, if required, except where required
or permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
4.4. President
The President shall have overall responsibility and authority for
management of the operations of the Corporation, subject to the authority of the
Chief Executive Officer and the Board of Directors. The President may execute
bonds, mortgages and other contracts, under the seal of the Corporation, if
required, except where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation.
<PAGE>
4.5. Chief Financial Officer
The Chief Financial Officer shall have overall responsibility and
authority for management of the financial operations of the Corporation, subject
to the authority of the Chief Executive Officer and the Board of Directors. The
Chief Financial Officer may execute bonds, mortgages and other contracts, under
the seal of the Corporation, if required, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation.
4.6. Vice President
In the absence of the President or in the event of the President's
inability or refusal to act, the Vice President (or in the event there be more
than one Vice President, the Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President.
4.7. Secretary
The Secretary shall have responsibility for preparation of minutes of
meetings of the Board of Directors and of the stockholders and for
authenticating records of the Corporation. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors. The Secretary or an Assistant Secretary may also attest
all instruments signed by any other officer of the Corporation.
4.8. Assistant Secretary
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there shall
have been no such determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of the Secretary's inability or
refusal to act, perform the duties and exercise the powers of the Secretary.
4.9. Treasurer
The Treasurer shall have responsibility for the custody of the
corporate funds and securities and shall see to it that full and accurate
accounts of receipts and disbursements are kept in books belonging to the
Corporation. The Treasurer shall render to the Chairperson, the Chief Executive
Officer, the President, the Chief Financial Officer and the Board of Directors,
upon request, an account of all financial transactions and of the financial
condition of the Corporation.
4.10. Assistant Treasurer
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or if
there shall have been no
<PAGE>
such determination, then in the order of their election), shall, in the absence
of the Treasurer or in the event of the Treasurer's inability or refusal to act,
perform the duties and exercise the powers of the Treasurer.
4.11. Term of Office
The officers of the Corporation shall hold office until their
successors are chosen and qualify or until their earlier resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. Any
officer elected or appointed by the Board of Directors may be removed at any
time, with or without cause, by the affirmative vote of a majority of the Board
of Directors.
4.12. Compensation
The compensation of officers of the Corporation shall be fixed by the
Board of Directors or by any officer(s) authorized by the Board of Directors to
prescribe the compensation of such other officers.
4.13. Fidelity Bonds
The Corporation may secure the fidelity of any or all of its officers
or agents by bond or otherwise.
5. CAPITAL STOCK
5.1. Certificates of Stock; Uncertificated Shares
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution that some or all
of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates, and upon request
every holder of uncertificated shares, shall be entitled to have a certificate
(representing the number of shares registered in certificate form) signed in the
name of the Corporation by the Chairperson, Chief Executive Officer, President
or any Vice President, and by the Treasurer, Secretary or any Assistant
Treasurer or Assistant Secretary of the Corporation. Any or all the signatures
on the certificate may be facsimile. In case any officer, transfer agent or
registrar whose signature or facsimile signature appears on a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
<PAGE>
5.2. Lost Certificates
The Board of Directors, Chairperson, Chief Executive Officer,
President or Secretary may direct a new certificate of stock to be issued in
place of any certificate theretofore issued by the Corporation and alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming that the certificate of stock has been lost, stolen
or destroyed. When authorizing such issuance of a new certificate, the board or
any such officer may, as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate or certificates, or such
owner's legal representative, to advertise the same in such manner as the board
or such officer shall require and/or to give the Corporation a bond or
indemnity, in such sum or on such terms and conditions as the board or such
officer may direct, as indemnity against any claim that may be made against the
Corporation on account of the certificate alleged to have been lost, stolen or
destroyed or on account of the issuance of such new certificate or
uncertificated shares.
5.3. Record Date
5.3.1. Actions by Stockholders
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty days nor less than ten days
before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
unless the Board of Directors fixes a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by the Delaware General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation in the manner prescribed by Section 213(b)
of the Delaware General Corporation Law. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
the Delaware General Corporation Law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
<PAGE>
5.3.2. Payments
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
5.4. Stockholders of Record
The Corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends, to
receive notifications, to vote as such owner, and to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise may be provided by the Delaware General Corporation Law.
6. INDEMNIFICATION
6.1. Authorization of Indemnification
Each person who was or is a party or is threatened to be made a party
to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
by or in the right of the Corporation or otherwise (a "proceeding"), by reason
of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
partner (limited or general) or agent of another corporation or of a
partnership, joint venture, limited liability company, trust or other
enterprise, including service with respect to an employee benefit plan, shall be
(and shall be deemed to have a contractual right to be) indemnified and held
harmless by the Corporation (and any successor to the Corporation by merger or
otherwise) to the fullest extent authorized by, and subject to the conditions
and (except as provided herein) procedures set forth in the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but any such
amendment shall not be deemed to limit or prohibit the rights of indemnification
hereunder for past acts or omissions of any such person insofar as such
amendment limits or prohibits the indemnification rights that said law permitted
the Corporation to provide prior to such amendment), against all expenses,
liabilities and losses (including attorneys' fees, judgments, fines, ERISA taxes
or penalties and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith; provided, however, that the
--------- --------
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person (except
for a suit or action pursuant to Section 6.2 hereof) only if such proceeding (or
part thereof) was authorized by the Board of Directors of the Corporation.
Persons who are not directors or officers of the Corporation may be similarly
indemnified in respect of such service
<PAGE>
to the extent authorized at any time by the Board of Directors of the
Corporation. The indemnification conferred in this Section 6.1 also shall
include the right to be paid by the Corporation (and such successor) the
expenses (including attorneys' fees) incurred in the defense of or other
involvement in any such proceeding in advance of its final disposition;
provided, however, that, if and to the extent the Delaware General Corporation
- --------- --------
Law requires, the payment of such expenses (including attorneys' fees) incurred
by a director or officer in advance of the final disposition of a proceeding
shall be made only upon delivery to the Corporation of an undertaking by or on
behalf of such director or officer to repay all amounts so paid in advance if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified under this Section 6.1 or otherwise; and provided further, that,
-------- --------
such expenses incurred by other employees and agents may be so paid in advance
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
6.2. Right of Claimant to Bring Action Against the Corporation
If a claim under Section 6.1 is not paid in full by the Corporation
within sixty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring an action against the Corporation
to recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense of prosecuting
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed or is otherwise not entitled to indemnification under Section
6.1, but the burden of proving such defense shall be on the Corporation. The
failure of the Corporation (in the manner provided under the Delaware General
Corporation Law) to have made a determination prior to or after the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in the Delaware General Corporation Law shall not be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct. Unless otherwise specified in an agreement with the
claimant, an actual determination by the Corporation (in the manner provided
under the Delaware General Corporation Law) after the commencement of such
action that the claimant has not met such applicable standard of conduct shall
not be a defense to the action, but shall create a presumption that the claimant
has not met the applicable standard of conduct.
6.3. Non-exclusivity
The rights to indemnification and advance payment of expenses provided
by Section 6.1 hereof shall not be deemed exclusive of any other rights to which
those seeking indemnification and advance payment of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
<PAGE>
6.4. Survival of Indemnification
The indemnification and advance payment of expenses and rights thereto
provided by, or granted pursuant to, Section 6.1 hereof shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee, partner or agent and shall inure to the
benefit of the personal representatives, heirs, executors and administrators of
such person.
6.5. Insurance
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company, trust
or other enterprise, against any liability asserted against such person or
incurred by such person in any such capacity, or arising out of such person's
status as such, and related expenses, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of the Delaware General Corporation Law.
7. GENERAL PROVISIONS
7.1. Inspection of Books and Records
Any stockholder, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the Corporation's
stock ledger, a list of its stockholders, and its other books and records, and
to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed to
the Corporation at its registered office or at its principal place of business.
7.2. Dividends
The Board of Directors may declare dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation
and the laws of the State of Delaware.
7.3. Reserves
The directors of the Corporation may set apart, out of the funds of
the Corporation available for dividends, a reserve or reserves for any proper
purpose and may abolish any such reserve.
<PAGE>
7.4. Execution of Instruments
All checks, drafts or other orders for the payment of money, and
promissory notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
7.5. Fiscal Year
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
7.6. Seal
The corporate seal shall be in such form as the Board of Directors
shall approve. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
7.7. Amendments
The Board of Directors or the stockholders may from time to time
adopt, amend or repeal the Bylaws of the Corporation. Such action by the Board
of Directors shall require the affirmative vote of at least a majority of the
directors then in office. Such action by the stockholders shall require the
affirmative vote of 66-2/3% of the total number of votes of the then outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class thereon.
* * * * *
The foregoing Bylaws were adopted by the Board of Directors on March
24, 1997.
/s/ J. Thomas Mullis
----------------------------------------
J. Thomas Mullis, Secretary
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
ITC/\DELTACOM, INC.,
Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
-------------------------
Indenture
Dated as of June 3, 1997
-------------------------
11% Senior Notes due 2007
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
---------------------
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
(S) 310(a)(1)......................................... 7.10
(a)(2)......................................... 7.10
(b)............................................ 7.08
(S) 313(c)............................................ 7.06; 11.02
(S) 314(a)............................................ 4.17; 11.02
(a)(4)......................................... 4.16; 11.02
(c)(1)......................................... 11.03
(c)(2)......................................... 11.03
(e)............................................ 11.04
(S) 315(b)............................................ 7.05; 11.02
(S) 316(a)(1)(A)...................................... 6.05
(a)(1)(B)...................................... 6.04
(b)............................................ 6.07
(S) 317(a)(1)......................................... 6.08
(a)(2)......................................... 6.09
(S) 318(a)............................................ 11.01
(c)............................................ 11.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C> <C>
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act........ 21
SECTION 1.03. Rules of Construction.................................... 22
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.......................................... 22
SECTION 2.02. Restrictive Legends...................................... 24
SECTION 2.03. Execution, Authentication and Denominations.............. 25
SECTION 2.04. Registrar and Paying Agent............................... 26
SECTION 2.05. Paying Agent to Hold Money in Trust...................... 27
SECTION 2.06. Transfer and Exchange.................................... 28
SECTION 2.07. Book-Entry Provisions for Global Notes................... 28
SECTION 2.08. Special Transfer Provisions.............................. 30
SECTION 2.09. Replacement Notes........................................ 34
SECTION 2.10. Outstanding Notes........................................ 34
SECTION 2.11. Temporary Notes.......................................... 34
SECTION 2.12. Cancellation............................................. 35
SECTION 2.13. CUSIP Numbers............................................ 35
SECTION 2.14. Defaulted Interest....................................... 35
SECTION 2.15. Issuance of Additional Notes............................. 36
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption; Mandatory Redemption................ 36
SECTION 3.02. Notices to Trustee....................................... 37
SECTION 3.03. Selection of Notes to Be Redeemed........................ 37
SECTION 3.04. Notice of Redemption..................................... 37
SECTION 3.05. Effect of Notice of Redemption........................... 38
</TABLE>
- -----------------------
Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Indenture.
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.06. Deposit of Redemption Price.............................. 38
SECTION 3.07. Payment of Notes Called for Redemption................... 39
SECTION 3.08. Notes Redeemed in Part................................... 39
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes......................................... 39
SECTION 4.02. Maintenance of Office or Agency.......................... 40
SECTION 4.03. Limitation on Indebtedness............................... 40
SECTION 4.04. Limitation on Restricted Payments........................ 42
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries........................ 45
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries.................................. 46
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries............................................. 47
SECTION 4.08. Limitation on Transactions with Stockholders and
Affiliates............................................... 47
SECTION 4.09. Limitation on Liens...................................... 48
SECTION 4.10. Limitation on Asset Sales................................ 48
SECTION 4.11. Repurchase of Notes upon a Change of Control............. 49
SECTION 4.12. Existence................................................ 50
SECTION 4.13. Payment of Taxes and Other Claims........................ 50
SECTION 4.14. Maintenance of Properties and Insurance.................. 50
SECTION 4.15. Notice of Defaults....................................... 51
SECTION 4.16. Compliance Certificates.................................. 51
SECTION 4.17. Commission Reports and Reports to Holders................ 51
SECTION 4.18. Waiver of Stay, Extension or Usury Laws.................. 52
SECTION 4.19. Limitation on Sale-Leaseback Transactions................ 52
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.............................. 53
SECTION 5.02. Successor Substituted.................................... 54
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................ 54
SECTION 6.02. Acceleration............................................. 55
</TABLE>
<PAGE>
iii
<TABLE>
<S> <C> <C>
SECTION 6.03. Other Remedies........................................... 56
SECTION 6.04. Waiver of Past Defaults.................................. 56
SECTION 6.05. Control by Majority...................................... 57
SECTION 6.06. Limitation on Suits...................................... 57
SECTION 6.07. Rights of Holders to Receive Payment..................... 58
SECTION 6.08. Collection Suit by Trustee............................... 58
SECTION 6.09. Trustee May File Proofs of Claim......................... 58
SECTION 6.10. Priorities............................................... 58
SECTION 6.11. Undertaking for Costs.................................... 59
SECTION 6.12. Restoration of Rights and Remedies....................... 59
SECTION 6.13. Rights and Remedies Cumulative........................... 59
SECTION 6.14. Delay or Omission Not Waiver............................. 59
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General.................................................. 60
SECTION 7.02. Certain Rights of Trustee................................ 60
SECTION 7.03. Individual Rights of Trustee............................. 61
SECTION 7.04. Trustee's Disclaimer..................................... 61
SECTION 7.05. Notice of Default........................................ 61
SECTION 7.06. Reports by Trustee to Holders............................ 62
SECTION 7.07. Compensation and Indemnity............................... 62
SECTION 7.08. Replacement of Trustee................................... 63
SECTION 7.09. Successor Trustee by Merger, Etc......................... 64
SECTION 7.10. Eligibility.............................................. 64
SECTION 7.11. Money Held in Trust...................................... 64
SECTION 7.12. Withholding Taxes........................................ 64
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations..................... 64
SECTION 8.02. Defeasance and Discharge of Indenture.................... 65
SECTION 8.03. Defeasance of Certain Obligations........................ 67
SECTION 8.04. Application of Trust Money............................... 69
SECTION 8.05. Repayment to Company..................................... 69
SECTION 8.06. Reinstatement............................................ 70
ARTICLE NINE
</TABLE>
<PAGE>
iv
<TABLE>
AMENDMENTS, SUPPLEMENTS AND WAIVERS
<S> <C> <C>
SECTION 9.01. Without Consent of Holders............................... 70
SECTION 9.02. With Consent of Holders.................................. 70
SECTION 9.03. Revocation and Effect of Consent......................... 72
SECTION 9.04. Notation on or Exchange of Notes......................... 72
SECTION 9.05. Trustee to Sign Amendments, Etc.......................... 72
SECTION 9.06. Conformity with Trust Indenture Act...................... 73
ARTICLE TEN
SECURITY
SECTION 10.01. Security................................................. 73
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939.............................. 74
SECTION 11.02. Notices.................................................. 75
SECTION 11.03. Certificate and Opinion as to Conditions Precedent....... 76
SECTION 11.04. Statements Required in Certificate or Opinion............ 76
SECTION 11.05. Rules by Trustee, Paying Agent or Registrar.............. 76
SECTION 11.06. Payment Date Other Than a Business Day................... 76
SECTION 11.07. Governing Law............................................ 77
SECTION 11.08. No Adverse Interpretation of Other Agreements............ 77
SECTION 11.09. No Recourse Against Others............................... 77
SECTION 11.10. Successors............................................... 77
SECTION 11.11. Duplicate Originals...................................... 77
SECTION 11.12. Separability............................................. 77
SECTION 11.13. Table of Contents, Headings, Etc......................... 77
EXHIBIT A Form of Note.....................................................A-1
EXHIBIT B Form of Certificate..............................................B-1
EXHIBIT C Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Non-QIB Accredited Investors............C-1
EXHIBIT D Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S............................D-1
</TABLE>
<PAGE>
INDENTURE, dated as of June 3, 1997, between ITC/\DELTACOM, INC., a
Delaware corporation (the "Company"), and United States Trust Company of New
-------
York, a bank and trust company organized under the New York banking law (the
"Trustee").
-------
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to $200,000,000 aggregate
principal amount of the Company's 11% Senior Notes due 2007 (the "Notes")
-----
issuable as provided in this Indenture. The Notes will be partially secured
pursuant to the terms of a Pledge Agreement (as defined herein) as provided by
Article Ten of this Indenture. All things necessary to make this Indenture a
valid agreement of the Company, in accordance with its terms, have been done,
and the Company has done all things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee hereunder and duly
issued by the Company, the valid obligations of the Company as hereinafter
provided.
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act of 1939 that are required to be a part of and to govern
indentures qualified under the Trust Indenture Act of 1939.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, the Company and the Trustee, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"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,
<PAGE>
2
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 paragraph of Section 4.04 (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 Section 4.04, 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
<PAGE>
3
conformity with GAAP and filed with the Commission or provided to the Trustee
pursuant to Section 4.17.
"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.
"Agent" means any Registrar, Co-Registrar, Paying Agent or authenticating
agent.
"Agent Members" has the meaning provided in Section 2.07(a).
"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 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 Article
Five; provided that "Asset Sale" shall not include
<PAGE>
4
(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 first
paragraph of Section 4.10, 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.
"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
"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
<PAGE>
5
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 this Indenture.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"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.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the name of the
Company (i) by its Chairman, a Vice Chairman, its President or a Vice President
and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary and delivered to the Trustee; provided, however, that such written
request or order may be signed by any two of the officers or directors listed in
clause (i) above in lieu of being signed by one of such officers or directors
listed in such clause (i) and one of the officers listed in clause (ii) above.
"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
<PAGE>
6
amount was deducted in 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 Section 4.17 (such
four
<PAGE>
7
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 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).
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 114 West 47th Street, New York, NY 10036, Attention: Corporate Trust
Department.
"Credit Agreement" means a $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.
<PAGE>
8
"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.
"Depositary" means The Depository Trust Company, its nominees, and their
respective successors.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.10.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Notes" means any securities of the Company containing terms
identical to the Notes (except that such Exchange Notes shall be registered
under the Securities Act) that are issued and exchanged for the Notes pursuant
to the Registration Rights Agreement and this Indenture.
"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 Section 4.03(a), (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.
<PAGE>
9
"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
this 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 this 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.
"Global Notes" has the meaning provided in Section 2.01.
"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.
"Guaranteed Indebtedness" has the meaning provided in Section 4.07.
"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
<PAGE>
10
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.
"Indenture" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means each semiannual interest payment date on June
1 and December 1 of each year, commencing December 1, 1997.
"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,
<PAGE>
11
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 (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 Section
4.06. For purposes of the definition of "Unrestricted Subsidiary" and Section
4.04, (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
<PAGE>
12
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.
"Non-U.S. Person" means a person who is not a "U.S. person" (as defined in
Regulation S).
"Notes" means any of the securities, as defined in the first paragraph of
the recitals hereof, that are authenticated and delivered under this Indenture.
For all purposes of this Indenture, the term "Notes" shall include the Notes
initially issued on the Closing Date, any Exchange Notes to be issued and
exchanged for any Notes pursuant to the Registration Rights Agreement and this
Indenture and any other Notes issued after the Closing Date under this
Indenture. For purposes of this Indenture, all Notes shall vote together as one
series of Notes under this Indenture.
"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 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;
<PAGE>
13
(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.
"Officer" means, with respect to the Company, (i) the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President or the
Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or
the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one Officer listed in
clause (i) of the definition thereof and one Officer listed in clause (ii) of
the definition thereof or two officers listed in clause (i) of the definition
thereof. Each Officers' Certificate (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include the statements provided for in TIA
Section 314(e).
"Offshore Global Note" has the meaning provided in Section 2.01.
"Offshore Notes Exchange Date" has the meaning provided in Section 2.01.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
"Opinion of Counsel" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company, that meets the requirements of
Section 11.04 hereof. Each such Opinion of Counsel shall include the statements
provided for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.04, except that, for
the purposes of Article Eight, the Paying Agent shall not be the Company or a
Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Permanent Offshore Global Notes" has the meaning provided in Section 2.01.
"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
<PAGE>
14
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 second paragraph of Section 4.03(a).
"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 Section 4.03, to finance the cost
(including, without limitation, the cost of design, development, construction,
acquisition, installation, 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
<PAGE>
15
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.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"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
<PAGE>
16
Pledge Account, as such agreement may be amended, restated, supplemented or
otherwise modified from time to time.
"Pledge Agreement Officers' Certificate" means the Officer's Certificate as
defined in the Pledge Agreement.
"Pledge Agreement Opinion of Counsel" means the Opinion of Counsel as
defined in the Pledge Agreement.
"Pledged Securities" means the U.S. government securities (and, prior to
the Reorganization, commercial paper rated at least "Prime-1" (or the equivalent
grade) by Moody's Investors Service, Inc. or "A-1" (or the then equivalent
grade) by Standard & 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.
"principal" of a debt security, including the Notes, means the principal
amount due on the Stated Maturity as shown on such debt security.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.02.
"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.
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.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"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
<PAGE>
17
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 Sections 4.10 and 4.11 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 Sections
4.10 and 4.11.
"Redemption Date" means, when used with respect to any Note to be redeemed,
the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Note to be
redeemed, the price at which such Note is to be redeemed pursuant to this
Indenture.
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Closing Date, between the Company and Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, First Union
Capital Markets Corp. and NationsBanc Capital Markets, Inc., and certain
permitted assigns specified therein.
"Registration Statement" means the Registration Statement as defined and
described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the May 15 or November 15 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"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.
<PAGE>
18
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller or any assistant controller or any other officer
of the Trustee in its Corporate Trust Department customarily performing
functions similar to those performed by any of the above-designated officers and
in each case having direct responsibility for the administration of this
Indenture or the Pledge Agreement and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933.
"Security Register" has the meaning provided in Section 2.04.
"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
<PAGE>
19
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.
"Subsidiary Guarantee" has the meaning provided in Section 4.07.
"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.
"Temporary Offshore Global Notes" has the meaning provided in Section 2.01.
<PAGE>
20
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S. Code (S)(S) 77aaa-77bbbb), as in effect on the date this Indenture was
executed, except as provided in Section 9.06.
"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.
"Transmission" means ITC Transmission Systems, Inc., a Delaware
corporation.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended and as codified in Title 11 of the United States Code, as amended from
time to time hereafter, or any successor federal bankruptcy law.
"U.S. Global Notes" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Physical Notes" has the meaning provided in Section 2.01.
<PAGE>
21
"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 Section
4.04. 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 this 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.
"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.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act. Whenever
-------------------------------------------------
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
<PAGE>
22
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set
forth in Section 1.01; and
(viii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. The Notes and the Trustee's certificate of
---------------
authentication shall be substantially in the form annexed hereto as Exhibit A
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange agreements to which the
Company is subject or usage. The Company shall approve the form of the Notes
and any notation, legend or endorsement on the Notes. Each Note shall be dated
the date of its authentication.
<PAGE>
23
The terms and provisions contained in the form of the Notes annexed hereto
as Exhibit A shall constitute, and are hereby expressly made, a part of this
Indenture. To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued initially
in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "U.S. Global Notes"),
-----------------
registered in the name of the nominee of the Depositary, deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the U.S. Global Notes may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, in accordance with the instructions given by the
Holder thereof, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on Regulation S
shall be issued initially in the form of one or more temporary global Notes in
registered form substantially in the form set forth in Exhibit A (the "Temporary
---------
Offshore Global Notes"), registered in the name of the nominee of the
- ---------------------
Depositary, deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. At any time following July 13, 1997 (the "Offshore Notes Exchange
-----------------------
Date"), upon receipt by the Trustee and the Company of a certificate
- ----
substantially in the form of Exhibit B hereto, one or more permanent global
Notes in registered form substantially in the form set forth in Exhibit A (the
"Permanent Offshore Global Notes"; and together with the Temporary Offshore
- --------------------------------
Global Notes, the "Offshore Global Notes") duly executed by the Company and
---------------------
authenticated by the Trustee as hereinafter provided shall be deposited with the
Trustee, as custodian for the Depositary, and the Registrar shall reflect on its
books and records the date and a decrease in the principal amount of the
Temporary Offshore Global Notes in an amount equal to the principal amount of
the beneficial interest in the Temporary Offshore Global Notes transferred.
Notes offered and sold in reliance on Regulation D under the Securities Act
shall be issued in the form of permanent certificated Notes in registered form
in substantially the form set forth in Exhibit A (the "U.S. Physical Notes").
-------------------
Notes issued pursuant to Section 2.07 in exchange for interests in the Offshore
Global Notes shall be in the form of permanent certificated Notes in registered
form substantially in the form set forth in Exhibit A (the "Offshore Physical
-----------------
Notes").
- -----
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes." The U.S. Global Notes
--------------
and the Offshore Global Notes are sometimes referred to herein as the "Global
------
Notes."
- -----
The definitive Notes shall be typed, printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of
<PAGE>
24
any securities exchange on which the Notes may be listed, all as determined by
the Officers executing such Notes, as evidenced by their execution of such
Notes.
SECTION 2.02. Restrictive Legends. Unless and until a Note is exchanged
-------------------
for an Exchange Note in connection with an effective Registration Statement
pursuant to the Registration Rights Agreement, the U.S. Global Notes, Temporary
Offshore Global Notes and each U.S. Physical Note shall bear the following
legend on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE
DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT,
(D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
<PAGE>
25
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED
TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.08 OF THE INDENTURE.
<PAGE>
26
SECTION 2.03. Execution, Authentication and Denominations. Subject to
-------------------------------------------
Article Four, the aggregate principal amount of Notes which may be authenticated
and delivered under this Indenture is unlimited. The Notes shall be executed by
two Officers of the Company. The signature of these Officers on the Notes may be
by facsimile or manual signature in the name and on behalf of the Company.
If an Officer whose signature is on a Note no longer holds that office at
the time the Trustee or authenticating agent authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
At any time and from time to time after the execution of this Indenture,
the Trustee or an authenticating agent shall upon receipt of a Company Order
authenticate for original issue Notes in the aggregate principal amount
specified in such Company Order; provided that the Trustee shall be entitled to
receive an Officers' Certificate and an Opinion of Counsel of the Company in
connection with such authentication of Notes. Such Company Order shall specify
the amount of Notes to be authenticated and the date on which the original issue
of Notes is to be authenticated and in case of an issuance of Notes pursuant to
Section 2.15, shall certify that such issuance is in compliance with Article
Four.
The Trustee may appoint an authenticating agent to authenticate Notes. An
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the
Company. The Trustee shall not be liable for the misconduct or negligence of
any authenticating agent appointed with due care.
The Notes shall be issuable only in registered form without coupons and
only in denominations of $1,000 in principal amount and any integral multiple of
$1,000 in excess thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain an
--------------------------
office or agency where Notes may be presented for registration of transfer or
for exchange (the "Registrar"), an office or agency where Notes may be presented
---------
for payment (the "Paying Agent") and an office or agency where notices and
------------
demands to or upon the Company in respect of the Notes and this Indenture may be
served, which shall be in the Borough of Manhattan, The City of New York. The
Company shall cause the Registrar to keep a register of the Notes and of their
transfer and exchange (the "Security Register"). The Company may have one or
-----------------
more co-Registrars and one or more additional Paying Agents.
<PAGE>
27
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall give prompt written
notice to the Trustee of the name and address of any such Agent and any change
in the address of such Agent. If the Company fails to maintain a Registrar,
Paying Agent and/or agent for service of notices and demands, the Trustee shall
act as such Registrar, Paying Agent and/or agent for service of notices and
demands. The Company may remove any Agent upon written notice to such Agent and
the Trustee; provided that no such removal shall become effective until (i) the
acceptance of an appointment by a successor Agent to such Agent as evidenced by
an appropriate agency agreement entered into by the Company and such successor
Agent and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Company, any Subsidiary of the
Company, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands.
The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notice and demands. The Trustee
shall preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of Holders and shall otherwise
comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company
shall furnish to the Trustee as of each Regular Record Date and at such other
times as the Trustee may request in writing a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Holders, including the aggregate principal amount of Notes held by each Holder.
<PAGE>
28
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later than 11:00
-----------------------------------
a.m. (New York City time) each due date of the principal, premium, if any, and
interest on any Notes, the Company shall deposit with the Paying Agent money in
immediately available funds sufficient to pay such principal, premium, if any,
and interest so becoming due. The Company shall require each Paying Agent other
than the Trustee to agree in writing that such Paying Agent shall hold in trust
for the benefit of the Holders or the Trustee all money held by the Paying Agent
for the payment of principal of, premium, if any, and interest on the Notes
(whether such money has been paid to it by the Company or any other obligor on
the Notes), and such Paying Agent shall promptly notify the Trustee of any
default by the Company (or any other obligor on the Notes) in making any such
payment. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and account for any funds disbursed, and the Trustee
may at any time during the continuance of any payment default, upon written
request to a Paying Agent, require such Paying Agent to pay all money held by it
to the Trustee and to account for any funds disbursed. Upon doing so, the
Paying Agent shall have no further liability for the money so paid over to the
Trustee. If the Company or any Subsidiary of the Company or any Affiliate of
any of them acts as Paying Agent, it will, on or before each due date of any
principal of, premium, if any, or interest on the Notes, segregate and hold in a
separate trust fund for the benefit of the Holders a sum of money sufficient to
pay such principal, premium, if any, or interest so becoming due until such sum
of money shall be paid to such Holders or otherwise disposed of as provided in
this Indenture, and will promptly notify the Trustee of its action or failure to
act.
SECTION 2.06. Transfer and Exchange. The Notes are issuable only in
---------------------
registered form. A Holder may transfer a Note only by written application to
the Registrar stating the name of the proposed transferee and otherwise
complying with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Registrar in the
Security Register. Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee, and any agent of the Company shall
treat the person in whose name the Note is registered as the owner thereof for
all purposes whether or not the Note shall be overdue, and neither the Company,
the Trustee, nor any such agent shall be affected by notice to the contrary.
Furthermore, any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent) and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry. When Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Notes of other
authorized denominations (including an exchange of Notes for Exchange Notes),
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met (including that such Notes are
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and Registrar duly executed by the Holder thereof or
by an attorney who is authorized in writing to act on behalf of the Holder);
provided that
<PAGE>
29
no exchanges of Notes for Exchange Notes shall occur until a Registration
Statement shall have been declared effective by the Commission and that any
Notes that are exchanged for Exchange Notes shall be cancelled by the Trustee.
To permit registrations of transfers and exchanges, the Company shall execute
and the Trustee shall authenticate Notes at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange or redemption
of the Notes, but the Company may require payment of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental charge payable
upon exchanges pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the transfer of
or exchange any Note during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes selected
for redemption under Section 3.03 and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Notes. (a) The U.S.
--------------------------------------
Global Notes and Offshore Global Notes initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent Members") shall have
-------------
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depositary, or the Trustee as its custodian, or under the Global
Note, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Note. Neither the Company nor the Trustee shall be
liable for any delay by the Depositary in identifying the beneficial owners of
the Notes and the Company and the Trustee may conclusively rely on, and shall be
protected in relying on, instructions from the Depositary for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of any Notes to be issued).
(b) Transfers of a Global Note shall be limited to transfers of such Global
Note in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in a Global Note may be
transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Notes or the Offshore Global
Notes, respectively, if (i) the Depositary
<PAGE>
30
notifies the Company that it is unwilling or unable to continue as Depositary
for the U.S. Global Notes or the Offshore Global Notes, as the case may be, and
a successor depositary is not appointed by the Company within 90 days of such
notice, (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depositary or (iii) in accordance with
the rules and procedures of the Depositary and the provisions of Section 2.08.
(c) Any beneficial interest in one of the Global Notes that is transferred
to a person who takes delivery in the form of an interest in the other Global
Note will, upon transfer, cease to be an interest in such Global Note and become
an interest in the other Global Note and, accordingly, will thereafter be
subject to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such an
interest.
(d) In connection with any transfer of a portion of the beneficial
interests in the U.S. Global Notes to beneficial owners pursuant to paragraph
(b) of this Section 2.07, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global Notes in an
amount equal to the principal amount of the beneficial interest in the U.S.
Global Notes to be transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more U.S. Physical Notes of like tenor
and amount.
(e) In connection with the transfer of the entire U.S. Global Note or
Offshore Global Note to beneficial owners pursuant to paragraph (b) of this
Section 2.07, the U.S. Global Note or Offshore Global Note, as the case may be,
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be,
an equal aggregate principal amount of U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an interest in the
U.S. Global Note pursuant to paragraph (b) or (d) of this Section 2.07 shall,
except as otherwise provided by paragraph (f) of Section 2.08, bear the legend
regarding transfer restrictions applicable to the U.S. Physical Note set forth
in Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an interest in the
Offshore Global Note pursuant to paragraph (b) of this Section 2.07 shall,
except as otherwise provided by paragraph (f) of Section 2.08, bear the legend
regarding transfer restrictions applicable to the Offshore Physical Note set
forth in Section 2.02.
(h) The registered holder of a Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
<PAGE>
31
SECTION 2.08. Special Transfer Provisions. Unless and until a Note is
---------------------------
exchanged for an Exchange Note in connection with an effective Registration
Statement pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The following
-------------------------------------------------------
provisions shall apply with respect to the registration of any proposed transfer
of a Note to any Institutional Accredited Investor which is not a QIB (excluding
Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Note, whether or
not such Note bears the Private Placement Legend, if (x) the requested
transfer is after the time period referred to in Rule 144(k) under the
Securities Act or (y) the proposed transferee has delivered to the
Registrar (A) a certificate substantially in the form of Exhibit C hereto
and (B) if the aggregate principal amount of the Notes being transferred is
less than $100,000, an opinion of counsel acceptable to the Company that
such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the U.S. Global Note in an amount
equal to the principal amount of the beneficial interest in the U.S. Global
Note to be transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more U.S. Physical Notes of like
tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with respect
-----------------
to the registration of any proposed transfer of a U.S. Physical Note or an
interest in the U.S. Global Note to a QIB (excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) U.S. Physical
Notes, the Registrar shall register the transfer if such transfer is being
made by a proposed transferor who has checked the box provided for on the
form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing
<PAGE>
32
representations in order to claim the exemption from registration provided
by Rule 144A or (y) an interest in the U.S. Global Note, the transfer of
such interest may be effected only through the book entry system maintained
by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the Note to be
transferred consists of U.S. Physical Notes, upon receipt by the Registrar
of the documents referred to in clause (i) and instructions given in
accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the U.S. Global Note in an amount equal to the
principal amount of the U.S. Physical Notes to be transferred, and the
Trustee shall cancel the U.S. Physical Note so transferred.
(c) Transfers of Interests in the Temporary Offshore Global Note. The
------------------------------------------------------------
following provisions shall apply with respect to registration of any proposed
transfer of interests in the Temporary Offshore Global Note:
(i) The Registrar shall register the transfer of any Note (x) if the
proposed transferee is a Non-U.S. Person and the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit D hereto or (y) if the proposed transferee is a QIB and the
proposed transferor has checked the box provided for on the form of Note
stating, or has otherwise advised the Company and the Registrar in writing,
that the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the form
of Note stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of the documents referred to in clause (i)(y) above and
instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and an increase in the principal amount of the U.S. Global Note in an
amount equal to the principal amount of the Temporary Offshore Global Note
to be transferred, and the Trustee shall decrease the amount of the
Temporary Offshore Global Note.
<PAGE>
33
(d) Transfers of Interests in the Permanent Offshore Global Note or
---------------------------------------------------------------
Offshore Physical Notes to U.S. Persons. The following provisions shall apply
- ---------------------------------------
with respect to any transfer of interests in the Permanent Offshore Global Note
or Offshore Physical Notes to U.S. Persons: The Registrar shall register the
transfer of any such Note without requiring any additional certification.
(e) Transfers to Non-U.S. Persons at Any Time. The following provisions
-----------------------------------------
shall apply with respect to any transfer of a Note to a Non-U.S. Person:
(i) Prior to July 13, 1997, the Registrar shall register any
proposed transfer of a Note to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit D hereto from the proposed
transferor.
(ii) On and after July 13, 1997, the Registrar shall register any
proposed transfer to any Non-U.S. Person if the Note to be transferred is a
U.S. Physical Note or an interest in the U.S. Global Note, upon receipt of
a certificate substantially in the form of Exhibit D hereto from the
proposed transferor.
(iii) (a) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (ii) and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the U.S. Global Note in an amount
equal to the principal amount of the beneficial interest in the U.S. Global
Note to be transferred, and (b) if the proposed transferee is an Agent
Member, upon receipt by the Registrar of instructions given in accordance
with the Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the Offshore Global Note in an amount equal to the principal
amount of the U.S. Physical Notes or the U.S. Global Note, as the case may
be, to be transferred, and the Trustee shall cancel the Physical Note, if
any, so transferred or decrease the amount of the U.S. Global Note.
(f) Private Placement Legend. Upon the transfer, exchange or replacement
------------------------
of Notes not bearing the Private Placement Legend, the Registrar shall deliver
Notes that do not bear the Private Placement Legend. Upon the transfer, exchange
or replacement of Notes bearing the Private Placement Legend, the Registrar
shall deliver only Notes that bear the Private Placement Legend unless either
(i) the circumstances contemplated by the fourth paragraph of Section 2.01 or
paragraph (a)(i)(x) or (e)(ii) of this Section 2.08 exist or (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
<PAGE>
34
(g) General. By its acceptance of any Note bearing the Private Placement
-------
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture. The
Registrar shall not register a transfer of any Note unless such transfer
complies with the restrictions on transfer of such Note set forth in this
Indenture. In connection with any transfer of Notes, each Holder agrees by its
acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; provided that the Registrar shall not be required to
determine (but may rely on a determination made by the Company with respect to)
the sufficiency of any such certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.07 or this Section 2.08. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.09. Replacement Notes. If a mutilated Note is surrendered to
-----------------
the Trustee or if the Holder claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding; provided that the requirements of the second
paragraph of Section 2.10 are met. If required by the Trustee or the Company,
an indemnity bond must be furnished that is sufficient in the judgment of both
the Trustee and the Company to protect the Company, the Trustee or any Agent
from any loss that any of them may suffer if a Note is replaced. The Company
may charge such Holder for its expenses and the expenses of the Trustee in
replacing a Note. In case any such mutilated, lost, destroyed or wrongfully
taken Note has become or is about to become due and payable, the Company in its
discretion may pay such Note instead of issuing a new Note in replacement
thereof.
Every replacement Note is an additional obligation of the Company and shall
be entitled to the benefits of this Indenture.
SECTION 2.10. Outstanding Notes. Notes outstanding at any time are all
-----------------
Notes that have been authenticated by the Trustee except for those cancelled by
it, those delivered to it for cancellation and those described in this Section
2.10 as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to be outstanding
unless and until the Trustee and the Company receive proof satisfactory to them
that the replaced Note is held by a bona fide purchaser.
<PAGE>
35
If the Paying Agent (other than the Company or an Affiliate of the Company)
holds on the maturity date money sufficient to pay Notes payable on that date,
then on and after that date such Notes cease to be outstanding and interest on
them shall cease to accrue.
A Note does not cease to be outstanding because the Company or one of its
Affiliates holds such Note, provided, however, that in determining whether the
Holders of the requisite principal amount of the outstanding Notes have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which a Responsible Officer of
the Trustee knows to be so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Company or any other
obligor upon the Notes or any Affiliate of the Company or of such other obligor.
SECTION 2.11. Temporary Notes. Until definitive Notes are ready for
---------------
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the temporary Notes, as
evidenced by their execution of such temporary Notes. If temporary Notes are
issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the temporary
Notes at the office or agency of the Company designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 2.12. Cancellation. The Company at any time may deliver to the
------------
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee shall cancel all Notes surrendered
for transfer, exchange, payment or cancellation and shall destroy them in
accordance with its normal procedure. Except as expressly permitted by this
Indenture, the Company may not issue new Notes to replace Notes it has paid in
full or delivered to the Trustee for cancellation.
<PAGE>
36
SECTION 2.13. CUSIP Numbers. The Company in issuing the Notes may use
-------------
"CUSIP", "CINS" or "ISIN" numbers (if then generally in use), and the Trustee
shall use CUSIP, CINS or ISIN numbers, as the case may be, in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice shall state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of
redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Notes. The Company will promptly notify
the Trustee of any change in "CUSIP", "CINS" or "ISIN" numbers for the Notes.
SECTION 2.14. Defaulted Interest. If the Company defaults in a payment of
------------------
interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay, the defaulted interest,
plus (to the extent lawful) any interest payable on the defaulted interest, to
the Persons who are Holders on a subsequent special record date. A special
record date, as used in this Section 2.14 with respect to the payment of any
defaulted interest, shall mean the 15th day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before the subsequent special record date, the
Company shall mail to each Holder and to the Trustee a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.15. Issuance of Additional Notes. The Company may, subject to
----------------------------
Article Four of this Indenture, issue additional Notes under this Indenture.
The Notes issued on the Closing Date and any additional Notes subsequently
issued shall be treated as a single class for all purposes under this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption; Mandatory Redemption. (a) The 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>
Redemption
Year Price
---- ----------
<S> <C>
2002........................ 105.500%
2003........................ 102.750
</TABLE>
<PAGE>
37
<TABLE>
<S> <C>
2004 and thereafter.......... 100.000
</TABLE>
(b) At any time prior to June 1, 2000, the Company may redeem up to 35% of
the principal amount of the 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 million aggregate principal amount of
Notes remains outstanding after each such redemption.
(c) In the event that the Reorganization is not consummated and certain
other conditions set forth in the Pledge Agreement are not satisfied by
September 15, 1997, or if it appears, in the sole judgment of the Company, that
the Reorganization will not be consummated and such conditions will not be
satisfied by September 15, 1997, the Company shall redeem the Notes in whole, on
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 a
Redemption Price equal to 101% of the principal amount of the Notes, plus
accrued and unpaid interest to the Redemption Date. On the earlier of (i)
September 15, 1997, if the Trustee has not received the Pledge Agreement
Officers' Certificate that the Reorganization has been consummated and certain
conditions have been satisfied and the Pledge Agreement Opinion of Counsel, and
(ii) such date on which the Trustee receives the Pledge Agreement Officers'
Certificate that the Reorganization will not be consummated and such conditions
will not be satisfied by September 15, 1997, the Trustee will mail by first-
class mail to each Holder's last address as it appears in the Security Register
a written notice that the Notes will be redeemed within 60 days.
SECTION 3.02. Notices to Trustee. If the Company elects to redeem Notes
------------------
pursuant to Section 3.01(a) or (b), it shall notify the Trustee in writing of
the Redemption Date and the principal amount of Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.02 in an
Officers' Certificate at least 45 days before the Redemption Date (unless a
shorter period shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Notes to Be Redeemed. If less than all of the
---------------------------------
Notes are to be redeemed at any time, the Trustee shall select the Notes to be
redeemed in compliance with the requirements, as certified to it by the Company,
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 fair and appropriate; provided that no Notes of $1,000 in
principal amount or less shall be redeemed in part.
<PAGE>
38
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption. Notes in denominations of $1,000 in principal
amount may only be redeemed in whole. The Trustee may select for redemption
portions (equal to $1,000 in principal amount or any integral multiple thereof)
of Notes that have denominations larger than $1,000 in principal amount.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Company and the Registrar promptly in writing of the Notes or portions of Notes
to be called for redemption.
SECTION 3.04. Notice of Redemption. With respect to any redemption of
--------------------
Notes pursuant to Section 3.01, at least 30 days but not more than 60 days
before a Redemption Date, the Company, in the case of a redemption pursuant to
Section 3.01(a) or (b), or the Trustee, in the case of a redemption pursuant to
Section 3.01(c), shall mail a notice of redemption by first-class mail to each
Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is to
receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Notes to the Paying Agent;
(vi) that, if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 in principal amount or any integral
multiple thereof) of such Note to be redeemed and that, on and after the
Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be reissued;
and
(vii) that, if any Note contains a CUSIP, CINS or ISIN number as
provided in Section 2.13, no representation is being made as to the
correctness of the CUSIP, CINS or ISIN number either as printed on the
Notes or as contained in the notice of redemption and that reliance may be
placed only on the other identification numbers printed on the Notes.
<PAGE>
39
At the Company's request (which request may be revoked by the Company at
any time prior to the time at which the Trustee shall have given such notice to
the Holders), made in writing to the Trustee at least 45 days (or such shorter
period as shall be satisfactory to the Trustee) before a Redemption Date, the
Trustee shall give the notice of redemption pursuant to Section 3.01(a) or (b)
in the name and at the expense of the Company. If, however, the Company gives
such notice to the Holders, the Company shall concurrently deliver to the
Trustee an Officers' Certificate stating that such notice has been given. The
Trustee shall give the notice of redemption if and as required pursuant to
Section 3.01(c).
SECTION 3.05. Effect of Notice of Redemption. Once notice of redemption
------------------------------
is mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price. Upon surrender of any Notes to the Paying
Agent, such Notes shall be paid at the Redemption Price, plus accrued interest,
if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether or
not the Holder receives the notice. In any event, failure to give such notice,
or any defect therein, shall not affect the validity of the proceedings for the
redemption of Notes held by Holders to whom such notice was properly given.
SECTION 3.06. Deposit of Redemption Price. On or prior to any Redemption
---------------------------
Date, the Company shall deposit with the Paying Agent (or, if the Company is
acting as its own Paying Agent, shall segregate and hold in trust as provided in
Section 2.05) money sufficient to pay the Redemption Price of and accrued
interest on all Notes to be redeemed on that date other than Notes or portions
thereof called for redemption on that date that have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.07. Payment of Notes Called for Redemption. If notice of
--------------------------------------
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued interest to such Redemption Date, and on and after such date (unless the
Company shall default in the payment of such Notes at the Redemption Price and
accrued interest to the Redemption Date, in which case the principal, until
paid, shall bear interest from the Redemption Date at the rate prescribed in the
Notes), such Notes shall cease to accrue interest. Upon surrender of any Note
for redemption in accordance with a notice of redemption, such Note shall be
paid and redeemed by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders registered as such at the close of business on the relevant Regular
Record Date.
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40
SECTION 3.08. Notes Redeemed in Part. Upon surrender of any Note that is
----------------------
redeemed in part, the Company shall execute and the Trustee shall authenticate
and deliver to the Holder a new Note equal in principal amount to the unredeemed
portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. The Company shall pay the principal of,
----------------
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company, or any
Affiliate of any of them) holds on that date money designated for and sufficient
to pay the installment. If the Company or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, an installment of principal,
premium, if any, or interest shall be considered paid on the due date if the
entity acting as Paying Agent complies with the last sentence of Section 2.05.
As provided in Section 6.09, upon any bankruptcy or reorganization procedure
relative to the Company, the Trustee shall serve as the Paying Agent, if any,
for the Notes.
The Company shall pay interest on overdue principal, premium, if any, and
interest on overdue installments of interest, to the extent lawful, at the rate
per annum specified in the Notes.
SECTION 4.02. Maintenance of Office or Agency. The Company will maintain
-------------------------------
in the Borough of Manhattan, The City of New York, an office or agency where
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
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41
The Company hereby initially designates the Corporate Trust Office of the
Trustee as such office of the Company in accordance with Section 2.04.
SECTION 4.03. 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 Section 4.10; (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
<PAGE>
42
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
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 in accordance with Article Eight; (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 Section 4.07; (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 Section 4.04 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 Section 4.04 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 Section 4.03, the maximum
amount of Indebtedness that the Company or a Restricted Subsidiary may Incur
pursuant to this Section 4.03 shall not be deemed to be exceeded due solely to
the result of fluctuations in the exchange rates of currencies.
<PAGE>
43
(c) For purposes of determining any particular amount of Indebtedness
under this Section 4.03, (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 Section 4.09
shall not be treated as Indebtedness. For purposes of determining compliance
with this Section 4.03, 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.
SECTION 4.04. 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
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 Section
4.03(a) 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
<PAGE>
44
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 Section 4.17 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 this 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 of Section
4.03(a), 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 Section 4.04) 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 Section 4.03(a); (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 Article Five; (vi) Investments in any Person the
primary business of which is
<PAGE>
45
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) of the second paragraph of
Section 4.03(a) or to make Restricted Payments pursuant to clause (C)(2) of the
first paragraph, or clause (iii) or (iv) of this paragraph, of this Section
4.04, 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 Section 4.04
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
<PAGE>
46
(C) of the first paragraph of this Section 4.04 only to the extent such proceeds
are not used for such redemption, repurchase or other acquisition of
Indebtedness.
SECTION 4.05. 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 this 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, 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 Section
4.05, (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 this 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
<PAGE>
47
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 Section 4.05 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 4.09 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.
SECTION 4.06. 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 Section 4.04 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 first paragraph of Section 4.10.
SECTION 4.07. 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 to, the Notes
("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary
-----------------------
simultaneously executes and delivers a supplemental indenture to this 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
<PAGE>
48
Indebtedness Incurred (I) under Credit Facilities pursuant to clause (i) of the
second paragraph of Section 4.03(a) or (II) pursuant to clause (vii) of the
second paragraph of Section 4.03(a). 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 this 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.
SECTION 4.08. 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 Section 4.04; or (vi) the Reorganization. Notwithstanding the
foregoing, any transaction covered by the first paragraph of this Section 4.08
and not covered by clauses (ii) through (vi) of this paragraph, the aggregate
<PAGE>
49
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.
SECTION 4.09. 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 this
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 Section 4.03(a); 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 Section 4.03(a); or (vi) Permitted
Liens.
SECTION 4.10. 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 Section 4.17), 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 Section 4.07 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 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
<PAGE>
50
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
Section 4.10. 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
Section 4.10 totals at least $5 million, the Company shall 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.
SECTION 4.11. Repurchase of Notes upon a Change of Control. The Company
--------------------------------------------
shall commence, within 30 days after the occurrence of a Change of Control, and
consummate an Offer to Purchase for all Notes then outstanding, at a purchase
price equal to 101% of the principal amount thereof, plus accrued interest to
the Payment Date.
SECTION 4.12. Existence. Subject to Articles Four and Five of this
---------
Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
Subsidiary; provided that the Company shall not be required to preserve any such
right, license or franchise, or the existence of any Restricted Subsidiary, if
the maintenance or preservation thereof is no longer desirable in the conduct of
the business of the Company and its Restricted Subsidiaries taken as a whole;
provided, further, that prior to the consummation of the Reorganization, the
Reorganization Subsidiaries will not consummate any Asset Sale other than sales,
transfers or other dispositions of property or equipment having a fair market
value not to exceed $20 million to a Person pursuant to a written agreement
which provides for the repurchase or reacquisition of such property or equipment
by the Company or any of its Restricted Subsidiaries upon termination of such
agreement or at the option of the Company or any of its Restricted Subsidiaries
for equal or lesser consideration.
<PAGE>
51
SECTION 4.13. Payment of Taxes and Other Claims. The Company will pay or
---------------------------------
discharge and shall cause each of its Subsidiaries to pay or discharge, or cause
to be paid or discharged, before the same shall become delinquent (i) all
material taxes, assessments and governmental charges levied or imposed upon (a)
the Company or any such Subsidiary, (b) the income or profits of any such
Subsidiary which is a corporation or (c) the property of the Company or any such
Subsidiary and (ii) all material lawful claims for labor, materials and supplies
that, if unpaid, might by law become a lien upon the property of the Company or
any such Subsidiary; provided that the Company shall not be required to pay or
discharge, or cause to be paid or discharged, any such tax, assessment, charge
or claim the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established.
SECTION 4.14. Maintenance of Properties and Insurance. The Company will
---------------------------------------
cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section 4.14 shall prevent the Company or any such Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Company, desirable in the conduct of the business of the Company or such
Subsidiary.
The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers or with the government of the United States of America, or an agency or
instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry in which the Company or any such Restricted Subsidiary, as the case may
be, is then conducting business.
SECTION 4.15. Notice of Defaults. In the event that the Company becomes
------------------
aware of any Default or Event of Default, the Company, promptly after it becomes
aware thereof, will give written notice thereof to the Trustee.
SECTION 4.16. Compliance Certificates. (a) The Company shall deliver to
-----------------------
the Trustee, within 45 days after the end of each fiscal quarter (90 days after
the end of the last fiscal quarter of each year), an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
occurred during such fiscal quarter. In the case of the Officers' Certificate
delivered within 90 days after the end of the Company's fiscal year, such
certificate shall contain a
<PAGE>
52
certification from the principal executive officer, principal financial officer
or principal accounting officer of the Company that a review has been conducted
of the activities of the Company and its Restricted Subsidiaries and the
Company's and its Restricted Subsidiaries' performance under this Indenture and
that the Company has complied with all conditions and covenants under this
Indenture. For purposes of this Section 4.16, such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture. If the officers of the Company signing such
certificate do know of such a Default or Event of Default, the certificate shall
describe any such Default or Event of Default and its status. The first
certificate to be delivered pursuant to this Section 4.16(a) shall be for the
first fiscal quarter beginning after the execution of this Indenture.
(b) The Company shall deliver to the Trustee, within 90 days after the
end of the Company's fiscal year, a certificate signed by the Company's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the Notes
as they relate to accounting matters, (ii) that they have read the most recent
Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this
Section 4.16 and (iii) whether, in connection with their audit examination,
anything came to their attention that caused them to believe that the Company
was not in compliance with any of the terms, covenants, provisions or conditions
of Article Four and Section 5.01 of this Indenture as they pertain to accounting
matters and, if any Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; provided that such
independent certified public accountants shall not be liable in respect of such
statement by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination.
SECTION 4.17. 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.
SECTION 4.18. Waiver of Stay, Extension or Usury Laws. The Company
---------------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion
<PAGE>
53
of the principal of, premium, if any, or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 4.19. 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 Section 4.10.
<PAGE>
54
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. 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 this 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 Section 4.03(a); 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 and its Restricted Subsidiaries for all purposes
of this 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.
<PAGE>
55
SECTION 5.02. Successor Substituted. Upon any consolidation or merger, or
---------------------
any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; provided that the Company shall not be released from its
obligation to pay the principal of, premium, if any, or interest on the Notes in
the case of a lease of all or substantially all of its property and assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall occur with
----------------- ----------------
respect to the Notes if:
(a) the Company defaults in the payment of the principal of (or
premium, if any, on) any Note when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any Note when
the same becomes due and payable, and such default continues 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) the Company defaults in the performance of, or breaches the
provisions of, Article Five, fails to make or consummate an Offer to
Purchase in accordance with Section 4.10 or 4.11 or fails to consummate a
redemption of the Notes in accordance with Section 3.01(c);
(d) the Company defaults in the performance of or breaches any
covenant or agreement of the Company in this Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above), and such
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
<PAGE>
56
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.
SECTION 6.02. Acceleration. If an Event of Default (other than an Event
------------
of Default specified in clause (g) or (h) of Section 6.01 that occurs with
respect to the Company) occurs and is
<PAGE>
57
continuing under this 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)
of Section 6.01 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) of
Section 6.01 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 judgment or decree of a court of
competent jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may, and at the direction of the Holders of at least a
majority in principal amount of the outstanding Notes shall, pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.02, 6.07 and
-----------------------
9.02, the Holders of at least a majority in principal amount of the outstanding
Notes, by notice to the Trustee, may waive an existing Default or Event of
Default and its consequences, except a Default in the payment of principal of,
premium, if any, or interest on any Note as specified in clause (a) or (b) of
Section 6.01 or in respect of a covenant or provision of this Indenture which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.
<PAGE>
58
SECTION 6.05. Control by Majority. 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 this 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.
SECTION 6.06. Limitation on Suits. A Holder may not pursue any remedy
-------------------
with respect to this 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 (and if requested provide) 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.
For purposes of Section 6.05 of this Indenture and this Section 6.06, the
Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
The limitations set forth in this Section 6.06 shall 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.
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59
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any
------------------------------------
other provision of this Indenture, 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, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default in
--------------------------
payment of principal, premium or interest specified in clause (a), (b) or (c) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor of the Notes for the whole amount of principal, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue principal,
premium, if any, and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate specified
in the Notes, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such
--------------------------------
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
7.07) and the Holders allowed in any judicial proceedings relative to the
Company (or any other obligor of the Notes), its creditors or its property and
shall be entitled and empowered to collect and receive any monies, securities or
other property payable or deliverable upon conversion or exchange of the Notes
or upon any such claims and to distribute the same, and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07. Nothing herein contained shall be deemed to empower
the Trustee to authorize or consent to, or accept or adopt on behalf of any
Holder, any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money pursuant to
----------
this Article Six, it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for principal of,
premium, if any, and interest on the Notes in respect of which or for the
benefit of which such money
<PAGE>
60
has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal,
premium, if any, and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
---------------------
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of the suit, and
the court may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by Holders of more than 10% in principal amount of the
outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or any
----------------------------------
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Company, Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Notes in Section 2.09, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Trustee or of any Holder to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article Six or by law to the Trustee or to the
<PAGE>
61
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of the Trustee
-------
shall be as provided by the TIA and as set forth herein. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or not herein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Article Seven.
SECTION 7.02. Certain Rights of Trustee. Subject to TIA Sections 315(a)
-------------------------
through (d):
(i) the Trustee may rely, and shall be protected in acting or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter
stated in any such document;
(ii) before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, which shall conform to
Section 11.04. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such certificate or opinion;
(iii) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any attorney or
agent appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction;
<PAGE>
62
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance
with the written direction of the Holders of a majority in principal amount
of the outstanding Notes relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture;
(vi) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate; and
(vii) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company
personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in its
----------------------------
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
--------------------
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event of Default
-----------------
occurs and is continuing and if such Default or Event of Default is known to a
Responsible Officer of the Trustee, the Trustee shall mail to each Holder in
the manner and to the extent provided in TIA Section 313(c) notice of the
Default or Event of Default within 45 days after it occurs, unless such Default
or Event of Default has been cured; provided, however, that, except in the case
of a default in the payment of the principal of, premium, if any, or interest on
any Note, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interest of the Holders.
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63
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each
-----------------------------
May 15, beginning with May 15, 1998, the Trustee shall mail to each Holder as
provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
--------------------------
Trustee such compensation as shall be agreed upon in writing for its services.
The compensation of the Trustee shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses and advances incurred or made
by the Trustee. Such expenses shall include the reasonable compensation and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities, obligations, damages, penalties, judgments, actions, suits,
proceedings, reasonable costs and expenses (including reasonable fees and
disbursements of counsel) of any kind whatsoever which may be incurred by the
Trustee in connection with any investigative, administrative or judicial
proceeding (whether or not such indemnified party is designated a party to such
proceeding) arising out of or in connection with the acceptance or
administration of its duties under this Indenture; provided, however, that the
Company need not reimburse any expense or indemnify against any loss,
obligation, damage, penalty, judgment, action, suit, proceeding, reasonable cost
or expense (including reasonable fees and disbursements of counsel) of any kind
whatsoever which may be incurred by the Trustee in connection with any
investigative, administrative or judicial proceeding (whether or not such
indemnified party is designated a party to such proceeding) in which it is
determined that the Trustee acted with negligence, bad faith or willful
misconduct. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder, unless the Company
is materially prejudiced thereby. The Company shall defend the claim and the
Trustee shall cooperate in the defense. Unless otherwise set forth herein, the
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held by the Trustee pursuant to the Pledge Agreement and money or property held
in trust to pay principal of, premium, if any, and interest on particular Notes.
If the Trustee incurs expenses or renders services after the occurrence of
an Event of Default specified in clause (g) or (h) of Section 6.01, the expenses
and the compensation for the services will be intended to constitute expenses of
administration under Title 11 of the United States Bankruptcy Code or any
applicable federal or state law for the relief of debtors.
<PAGE>
64
SECTION 7.08. Replacement of Trustee. A resignation or removal of the
----------------------
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.08.
The Trustee may resign at any time by so notifying the Company in writing
at least 30 days prior to the date of the proposed resignation. The Holders of
a majority in principal amount of the outstanding Notes may remove the Trustee
by so notifying the Trustee in writing and may appoint a successor Trustee with
the consent of the Company. The Company may remove the Trustee if: (i) the
Trustee is no longer eligible under Section 7.10; (ii) the Trustee is adjudged a
bankrupt or an insolvent; (iii) a receiver or other public officer takes charge
of the Trustee or its property; or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after the delivery of
such written acceptance, subject to the lien provided in Section 7.07, (i) the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, (ii) the resignation or removal of the retiring Trustee shall
become effective and (iii) the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. A successor Trustee
shall mail notice of its succession to each Holder.
If the Trustee is no longer eligible under Section 7.10, any Holder who
satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
The Company shall give notice of any resignation and any removal of the
Trustee and each appointment of a successor Trustee to all Holders. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligation under Section 7.07 shall continue for the benefit of
the retiring Trustee.
<PAGE>
65
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee
--------------------------------
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.10. Eligibility. This Indenture shall always have a Trustee who
-----------
satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a
combined capital and surplus of at least $25 million as set forth in its most
recent published annual report of condition.
SECTION 7.11. Money Held in Trust. The Trustee shall not be liable for
-------------------
interest on any money received by it except as the Trustee may agree with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law and except for money held in trust
under Article Eight of this Indenture.
SECTION 7.12. Withholding Taxes. The Trustee, as agent for the Company,
-----------------
shall exclude and withhold from each payment of principal and interest and other
amounts due hereunder or under the Notes any and all withholding taxes
applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Notes, to withhold such amounts and timely pay the
same to the appropriate authority in the name of and on behalf of the Holders of
the Notes, that it will file any necessary withholding tax returns or statements
when due, and that, as promptly as possible after the payment thereof, it will
deliver to each Holder of a Note appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such Holders may
reasonably request from time to time.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except as otherwise
------------------------------------
provided in this Section 8.01, the Company may terminate its obligations under
the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other than
destroyed, lost or stolen Notes that have been replaced or Notes that are
paid pursuant to Section 4.01 or Notes for whose payment money or
securities have theretofore been held in trust and thereafter repaid to the
Company, as provided in Section 8.05) have been delivered to the Trustee
for cancellation and the Company has paid all sums payable by it hereunder;
or
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66
(ii) (A) the Notes mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption, (B) the Company
irrevocably deposits in trust with the Trustee during such one-year period,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds solely for the benefit of the
Holders for that purpose, money or U.S. Government Obligations sufficient
(in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee), without consideration of any reinvestment of any interest
thereon, to pay principal, premium, if, any, and interest on the Notes to
maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (C) no Default or Event of Default with respect to
the Notes shall have occurred and be continuing on the date of such
deposit, (D) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound and (E)
the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations under
Section 7.07 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the
Notes are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable deposit,
the Trustee upon request shall acknowledge in writing the discharge of the
Company's obligations under the Notes and this Indenture except for those
surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. 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 date of the deposit referred to
in clause (A) of this Section 8.02, and the provisions of this Indenture will no
longer be in effect with respect to the Notes, and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same, except
as to (i) rights of registration of transfer and exchange, (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of
Holders to receive payments of principal thereof and interest thereon, (iv) the
Company's obligations under Section 4.02, (v) the rights, obligations and
immunities of the Trustee hereunder and (vi) the rights of the Holders as
beneficiaries of this Indenture with respect to the property so deposited with
the Trustee payable to all or any of them; provided that the following
conditions shall have been satisfied:
(A) with reference to this Section 8.02, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 7.10) and conveyed
all right, title and interest for the benefit of the
<PAGE>
67
Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Notes, and dedicated solely to, the benefit of the Holders, in and to (1)
money in an amount, (2) U.S. Government Obligations that, through the
payment of interest, premium, if any, and principal in respect thereof in
accordance with their terms, will provide, not later than one day before
the due date of any payment referred to in this clause (A), money in an
amount or (3) a combination thereof in an amount sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and accrued interest on the outstanding Notes at the
Stated Maturity of such principal or interest; provided that the Trustee
shall have been irrevocably instructed to apply such money or the proceeds
of such U.S. Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Notes;
(B) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(C) immediately after giving effect to such deposit on a pro forma
basis, no Default or 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 such date of deposit;
(D) the Company shall have delivered to the Trustee (1) either (x) a
ruling directed to the Trustee received from the Internal Revenue Service
to the effect that the 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 Section 8.02 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 option had not been exercised or (y) an Opinion of
Counsel to the same effect as the ruling described in clause (x) above
accompanied by a ruling to that effect published by the Internal Revenue
Service, unless there has been a change in the applicable federal income
tax law since the date of this Indenture such that a ruling from the
Internal Revenue Service is no longer required and (2) an Opinion of
Counsel to the effect that (x) the creation of the defeasance trust does
not violate the Investment Company Act of 1940 and (y) after the passage of
123 days following the deposit (except, with respect to any trust funds for
the account of any Holder who may be deemed to be an "insider" for purposes
of the United States Bankruptcy Code, after one year following the
deposit), the trust funds 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
<PAGE>
68
Law in a case commenced by or against the Company under either such
statute, and either (I) the trust funds will no longer remain the property
of the Company (and therefore will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally) or (II) if a court were to rule under any such
law in any case or proceeding that the trust funds remained property of the
Company, (a) assuming such trust funds remained in the possession of the
Trustee prior to such court ruling to the extent not paid to the Holders,
the Trustee will hold, for the benefit of the Holders, a valid and
perfected security interest in such trust funds that is not avoidable in
bankruptcy or otherwise except for the effect of Section 552(b) of the
United States Bankruptcy Code on interest on the trust funds accruing after
the commencement of a case under such statute and (b) the Holders will be
entitled to receive adequate protection of their interests in such trust
funds if such trust funds are used in such case or proceeding;
(E) if the Notes are then listed on a national securities exchange,
the Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that such deposit, defeasance and discharge will not cause the
Notes to be delisted; and
(F) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (D)(2)(y) of this Section 8.02, none of the
Company's obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day (or one year) period with respect to this Section 8.02,
the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 shall survive until the Notes
are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07, 8.05 and 8.06 shall survive. If and when a ruling from the
Internal Revenue Service or an Opinion of Counsel referred to in clause (D)(1)
of this Section 8.02 is able to be provided specifically without regard to, and
not in reliance upon, the continuance of the Company's obligations under Section
4.01, then the Company's obligations under such Section 4.01 shall cease upon
delivery to the Trustee of such ruling or Opinion of Counsel and compliance with
the other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Company may omit to
---------------------------------
comply with any term, provision or condition set forth in clauses (iii) and (iv)
Section 5.01 and Sections 4.03 through 4.17, Section 4.19 and clause (d) of
Section 6.01 with respect to clauses (iii) and (iv)
<PAGE>
69
of Section 5.01 and Sections 4.03 through 4.17, Section 4.19 and clause (d) of
Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01 and Sections
4.03 through 4.17, Section 4.19 and clauses (e) and (f) of Section 6.01 shall be
deemed not to be Events of Default, in each case with respect to the outstanding
Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 7.10)
and conveyed all right, title and interest to the Trustee for the benefit
of the Holders, under the terms of an irrevocable trust agreement in form
and substance satisfactory to the Trustee as trust funds in trust,
specifically pledged to the Trustee for the benefit of the Holders as
security for payment of the principal of, premium, if any, and interest, if
any, on the Notes, and dedicated solely to, the benefit of the Holders, in
and to (A) money in an amount, (B) U.S. Government Obligations that,
through the payment of interest and principal in respect thereof in
accordance with their terms, will provide, not later than one day before
the due date of any payment referred to in this clause (i), money in an
amount or (C) a combination thereof in an amount sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Notes on the Stated
Maturity of such principal or interest; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal, premium,
if any, and interest with respect to the Notes;
(ii) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(iii) immediately after giving effect to such deposit on a pro forma
basis, no Default or 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 such date of deposit;
(iv) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that (A) the creation of the defeasance trust does not
violate the Investment Company Act of 1940, (B) the Trustee, for the
benefit of the Holders, has a valid first-priority security interest in the
trust funds, (C) the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance of
certain obligations 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 and (D) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
<PAGE>
70
"insider" for purposes of the United States Bankruptcy Code, after one year
following the deposit), the trust funds 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 in a case commenced by or against the
Company under either such statute, and either (1) the trust funds will no
longer remain the property of the Company (and therefore will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or
(2) if a court were to rule under any such law in any case or proceeding
that the trust funds remained property of the Company, (x) assuming such
trust funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to the Holders, the Trustee will hold, for
the benefit of the Holders, a valid and perfected security interest in such
trust funds that is not avoidable in bankruptcy or otherwise (except for
the effect of Section 552(b) of the United States Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case under
such statute) and (y) the Holders will be entitled to receive adequate
protection of their interests in such trust funds if such trust funds are
used in such case or proceeding;
(v) if the Notes are then listed on a national securities exchange,
the Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that such deposit defeasance and discharge will not cause the
Notes to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section 8.06, the
--------------------------
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
and shall apply the deposited money and the money from U.S. Government
Obligations in accordance with the Notes and this Indenture to the payment of
principal of, premium, if any, and interest on the Notes; but such money need
not be segregated from other funds except to the extent required by law.
SECTION 8.05. Repayment to Company. Subject to Sections 7.07, 8.01, 8.02
--------------------
and 8.03, the Trustee and the Paying Agent shall promptly pay to the Company
upon request set forth in an Officers' Certificate any excess money held by them
at any time and thereupon shall be relieved from all liability with respect to
such money. The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal, premium, if any, or
interest that remains unclaimed for two years. After payment to the Company,
Holders entitled to such money must look to the Company for payment as general
creditors unless an applicable law designates another Person, and all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
<PAGE>
71
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to
-------------
apply any money or U.S. Government Obligations in accordance with Section 8.01,
8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or
8.03, as the case may be; provided that, if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when authorized by
--------------------------
a resolution of its Board of Directors (as evidenced by a Board Resolution
delivered to the Trustee), and the Trustee may amend or supplement this
Indenture or the Notes without notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in this Indenture;
provided that such amendments or supplements shall not, in the good faith
opinion of the Board of Directors as evidenced by a Board Resolution,
adversely affect the interests of the Holders in any material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(5) to make any change that, in the good faith opinion of the Board
of Directors as evidenced by a Board Resolution, does not materially and
adversely affect the rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Sections 6.04 and 6.07
-----------------------
and without prior notice to the Holders, the Company, when authorized by its
Board of Directors (as evidenced
<PAGE>
72
by a Board Resolution delivered to the Trustee), and the Trustee may amend this
Indenture, the Notes and the Pledge Agreement with the written consent of the
Holders of a majority in principal amount of the Notes then outstanding, and the
Holders of a majority in principal amount of the Notes then outstanding by
written notice to the Trustee may waive future compliance by the Company with
any provision of this Indenture, the Notes and the Pledge Agreement.
Notwithstanding the provisions of this Section 9.02, without the consent of
each Holder affected, an amendment or waiver, including a waiver pursuant to
Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or adversely affect any right of repayment at the
option of any Holder of any Note, or change any place of payment where, or
the currency in which, any Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage in principal amount of outstanding Notes
the consent of whose Holders is required for any such supplemental
indenture, for any waiver of compliance with certain provisions of this
Indenture or certain Defaults and their consequences provided for in this
Indenture;
(iii) waive a default in the payment of principal of, premium, if
any, or interest on, any Note;
(iv) modify Article Ten or the Pledge Agreement in a manner that
adversely affects the rights of any Holder in any material respect; or
(v) modify any of the provisions of this Section 9.02, except to
increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Note affected thereby.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. The Company will mail
supplemental indentures to Holders upon request.
<PAGE>
73
Any failure of the Company to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such supplemental
indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an amendment or
--------------------------------
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the time the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder unless it is of the type described in any of clauses (i) through
(v) of the second paragraph of Section 9.02. In case of an amendment or waiver
of the type described in clauses (i) through (v) of the second paragraph of
Section 9.02, the amendment or waiver shall bind each Holder who has consented
to it and every subsequent Holder of a Note that evidences the same indebtedness
as the Note of the consenting Holder.
SECTION 9.04. Notation on or Exchange of Notes. If an amendment,
--------------------------------
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver it to the Trustee. At the Company's expense, the Trustee may
place an appropriate notation on the Note about the changed terms and return it
to the Holder and the Trustee may place an appropriate notation on any Note
thereafter authenticated. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation, or issue a new Note, shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee shall be
-------------------------------
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and that it will be valid and binding upon the Company.
<PAGE>
74
Subject to the preceding sentence, the Trustee shall sign such amendment,
supplement or waiver if the same does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. The Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every supplemental
-----------------------------------
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.
ARTICLE TEN
SECURITY
SECTION 10.01. Security. (a) On the Closing Date, the Company shall (i)
--------
enter into the Pledge Agreement and comply with the terms and provisions thereof
and (ii) cause the Pledged Securities to be pledged to the Trustee for the
benefit of the Holders in an amount equal to the net proceeds to be received by
the Company from the sale of the Notes. The Pledged Securities shall be pledged
by the Company to the Trustee for the benefit of the Holders and shall be held
by the Trustee in the Pledge Account pending disposition pursuant to the Pledge
Agreement.
(b) Each Holder, by its acceptance of a Note, consents and agrees to the
terms of the Pledge Agreement (including, without limitation, the provisions
providing for foreclosure and release of the Pledged Securities) as the same may
be in effect or may be amended from time to time in accordance with its terms,
and authorizes and directs the Trustee to enter into the Pledge Agreement and to
perform its respective obligations and exercise its respective rights thereunder
in accordance therewith. The Company will do or cause to be done all such acts
and things as may be necessary or proper, or as may be required by the
provisions of the Pledge Agreement, to assure and confirm to the Trustee the
security interest in the Pledged Securities contemplated hereby, by the Pledge
Agreement or any part thereof, as from time to time constituted, so as to render
the same available for the security and benefit of this Indenture and of the
Notes secured hereby, according to the intent and purposes herein expressed.
The Company shall take, or shall cause to be taken, any and all actions
reasonably required (and any action requested by the Trustee) to cause the
Pledge Agreement to create and maintain, as security for the obligations of the
Company under this Indenture and the Notes, valid and enforceable first priority
liens in and on all the Pledged Securities, in favor of the Trustee, superior to
and prior to the rights of third Persons and subject to no other Liens.
(c) The release of any Pledged Securities pursuant to the Pledge Agreement
will not be deemed to impair the security under this Indenture in contravention
of the provisions hereof if and to the extent the Pledged Securities are
released pursuant to this Indenture and the Pledge Agreement. To the extent
applicable, the Company shall cause TIA Section 314(d) relating to the
<PAGE>
75
release of property or securities from the Lien and security interest of the
Pledge Agreement (other than pursuant to Sections 7(c) and 7(d) thereof) and
relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Pledge Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an Officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected by the Company.
(d) The Company shall cause TIA Section 314(b), relating to opinions of
counsel regarding the Lien under the Pledge Agreement, to be complied with. The
Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as
conclusive evidence of compliance with the foregoing provisions the appropriate
statements contained in such instruments.
(e) The Trustee, in its sole discretion and without the consent of the
Holders, may, and at the request of the Holders of at least 25% in aggregate
principal amount of Notes then outstanding shall, on behalf of the Holders, take
all actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Pledge Agreement and (ii) collect and receive any and all amounts
payable in respect of the obligations of the Company thereunder. The Trustee
shall have power to institute and to maintain such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Pledged Securities (including power to institute
and maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders or of the Trustee).
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939. Prior to the effectiveness of
---------------------------
the Registration Statement, this Indenture shall incorporate and be governed by
the provisions of the TIA that are required to be part of and to govern
indentures qualified under the TIA. After the effectiveness of the Registration
Statement, this Indenture shall be subject to the provisions of the TIA that are
required to be a part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
SECTION 11.02. Notices. Any notice or communication shall be sufficiently
-------
given if in writing and delivered in person, mailed by first-class mail or sent
by telecopier transmission addressed as follows:
<PAGE>
76
if to the Company:
-----------------
ITC/\DeltaCom, Inc.
206 West 9th Street
West Point, GA 31833
Telecopier No.: (706) 645-8989
Attention: Chief Financial Officer
if to the Trustee:
-----------------
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Telecopier No.: (212) 852-1626
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to it at its
address as it appears on the Security Register by first-class mail and shall be
sufficiently given to him if so mailed within the time prescribed. Copies of
any such communication or notice to a Holder shall also be mailed to the Trustee
and each Agent at the same time.
Failure to transmit a notice or communication to a Holder as provided
herein or any defect in any such notice shall not affect its sufficiency with
respect to other Holders. Except for a notice to the Trustee, which is deemed
given only when received, and except as otherwise provided in this Indenture, if
a notice or communication is mailed in the manner provided in this Section
11.02, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
<PAGE>
77
SECTION 11.03. Certificate and Opinion as to Conditions Precedent. Upon
--------------------------------------------------
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 11.04. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in such
certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(iv) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
however, that, with respect to matters of fact, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 11.05. Rules by Trustee, Paying Agent or Registrar. The Trustee
-------------------------------------------
may make reasonable rules for action by or at a meeting of Holders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 11.06. Payment Date Other Than a Business Day. If an Interest
--------------------------------------
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Note shall not be a Business Day, then payment of principal of, premium,
if any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Payment Date or Redemption
Date, or at the Stated Maturity or date of maturity of such Note; provided that
no
<PAGE>
78
interest shall accrue for the period from and after such Interest Payment Date,
Payment Date, Redemption Date, Stated Maturity or date of maturity, as the case
may be.
SECTION 11.07. Governing Law. The laws of the State of New York shall
-------------
govern this Indenture and the Notes. The Trustee, the Company and the Holders
agree to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Indenture or the
Notes.
SECTION 11.08. No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any Subsidiary of the Company. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.09. No Recourse Against Others. No recourse for the payment of
--------------------------
the principal of, premium, if any, or interest on any of the 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 contained in this
Indenture, or in any of the Notes, or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator or
against any past, present or future partner, shareholder, other equityholder,
officer, director, employee or controlling person, as such, of the Company or of
any successor Person, either directly or through the Company or any successor
Person, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
SECTION 11.10. Successors. All agreements of the Company in this
----------
Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 11.11. Duplicate Originals. The parties may sign any number of
-------------------
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 11.12. Separability. In case any provision in this Indenture or
------------
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.13. Table of Contents, Headings, Etc. The Table of Contents,
--------------------------------
Cross-Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
ITC/\DELTACOM, INC.
By: /s/ Andrew Walker
------------------------------------
Name: Andrew Walker
Title: Chief Executive Officer
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
------------------------------------
Name: Gerard F. Ganey
Title: Sr. VP
<PAGE>
EXHIBIT A
---------
[FACE OF NOTE]
ITC/\DELTACOM, INC.
11% Senior Note due 2007
[CUSIP] [CINS] [__________]
No. $_________
ITC/\DELTACOM, INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to _____________, or its registered assigns, the
principal sum of ____________ ($____) on June 1, 2007.
Interest Payment Dates: June 1 and December 1, commencing December 1, 1997.
Regular Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Date: June , 1997 ITC/\DELTACOM, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 11% Senior Notes due 2007 described in the within-mentioned
Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK
as Trustee
By:
--------------------------------
Authorized Signatory
<PAGE>
A-3
[REVERSE SIDE OF NOTE]
ITC/\DELTACOM, INC.
11% Senior Note due 2007
1. Principal and Interest.
----------------------
The Company will pay the principal of this Note on June 1, 2007.
The Company promises to pay interest on the principal amount of this Note
on each Interest Payment Date, as set forth below, at the rate per annum shown
above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the May 15 or November 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
December 1, 1997.
If an exchange offer (the "Exchange Offer") registered under the Securities
Act is not consummated and a shelf registration statement (the "Shelf
Registration Statement") under the Securities Act with respect to resales of the
Notes is not declared effective by the Commission, on or before December 3, 1997
in accordance with the terms of the Registration Rights Agreement dated as of
June 3, 1997 between the Company and Morgan Stanley & Co. Incorporated, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, First Union Capital Markets Corp.
and NationsBanc Capital Markets, Inc., the annual interest rate borne by the
Notes shall be increased by 0.5% from the rate shown above accruing from
December 3, 1997, payable in cash semiannually, in arrears, on each Interest
Payment Date, commencing June 1, 1998 until the Exchange Offer is consummated or
the Shelf Registration Statement is declared effective. The Holder of this Note
is entitled to the benefits of such Registration Rights Agreement.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from June 3, 1997;
provided that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.
<PAGE>
A-4
2. Method of Payment.
-----------------
The Company will pay interest (except defaulted interest) on the principal
amount of the Notes as provided above on each June 1 and December 1 commencing
December 1, 1997 to the persons who are Holders (as reflected in the Security
Register at the close of business on the May 15 or November 15 immediately
preceding the Interest Payment Date), in each case, even if the Note is
cancelled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after June 1, 2007.
The Company will pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal, premium, if any, and interest by its check payable in such money. It
may mail an interest check to a Holder's registered address (as reflected in the
Security Register). If a payment date is a date other than a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is a Business Day and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any
of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
----------------------
The Company issued the Notes under an Indenture dated as of June 3, 1997
(the "Indenture"), between the Company and United States Trust Company of New
York, trustee (the "Trustee"). Capitalized terms herein are used as defined in
the Indenture unless otherwise indicated. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
The Notes are general obligations of the Company.
5. Optional Redemption.
-------------------
<PAGE>
A-5
The 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>
At any time prior to June 1, 2000, the Company may redeem up to 35% of the
principal amount of the 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 million aggregate principal amount of
Notes remains outstanding after each such redemption.
Notes in original denominations larger than $1,000 may be redeemed in part.
On and after the Redemption Date, interest ceases to accrue on Notes or portions
of Notes called for redemption, unless the Company defaults in the payment of
the Redemption Price.
6. Special Redemption.
------------------
In the event that the Reorganization is not consummated and certain other
conditions set forth in the Pledge Agreement are not satisfied by September 15,
1997, or if it appears, in the sole judgment of the Company, that the
Reorganization will not be consummated and such conditions will not be satisfied
by September 15, 1997, the Company shall redeem the Notes in whole, on 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 a Redemption
Price equal to 101% of the principal amount of the Notes, plus accrued and
unpaid interest to the Redemption Date. On the earlier of (i) September 15,
1997, if the Trustee has not received the Pledge Agreement Officers' Certificate
that the Reorganization has been consummated and certain conditions have been
satisfied and the Pledge Agreement Opinion of Counsel, and (ii) such date on
which the Trustee receives the Pledge Agreement Officers' Certificate that the
Reorganization will not be consummated and such conditions will not be satisfied
by September 15, 1997, the Trustee will mail by first class mail to
<PAGE>
A-6
each Holder's last address as it appears in the Security Register a written
notice that the Notes will be redeemed within 60 days.
7. Repurchase upon Change of Control.
---------------------------------
Upon the occurrence of any Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash pursuant to
the offer described in the Indenture at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (the "Payment Date").
A notice of such Change of Control will be mailed within 30 days after any
Change of Control occurs to each Holder at its last address as it appears in the
Security Register. Notes in original denominations larger than $1,000 may be
sold to the Company in part. On and after the Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the purchase price.
8. Denominations; Transfer; Exchange.
---------------------------------
The Notes are in registered form without coupons in denominations of $1,000
of principal amount and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Notes selected for redemption. Also, it need not register
the transfer or exchange of any Notes for a period of 15 days before the day of
mailing of a notice of redemption of Notes selected for redemption.
9. Persons Deemed Owners.
---------------------
A Holder shall be treated as the owner of a Note for all purposes.
10. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or interest remains
unclaimed for two years, the Trustee and the Paying Agent will pay the money
back to the Company at its request. After that, Holders entitled to the money
must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
-----------------------------------------
<PAGE>
A-7
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Notes, except in certain
circumstances for certain sections thereof, and (b) to the Stated Maturity, the
Company will be discharged from certain covenants set forth in the Indenture.
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding, and any existing default or compliance
with any provision may be waived with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding. Without notice to
or the consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially and adversely affect
the rights of any Holder.
13. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the Company and
its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
14. Successor Persons.
-----------------
When a successor person or other entity assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor person will be
released from those obligations.
15. Defaults and Remedies.
---------------------
The following events constitute "Events of Default" under the Indenture:
(a) default 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) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues 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) default in the performance or breach
of Article Five or Section 3.01(c) of the Indenture or the failure to make or
consummate an Offer to Purchase in accordance with Section 4.10 or 4.11 of the
Indenture; (d) default in the performance of or breach of any covenant
<PAGE>
A-8
or agreement of the Company in the Indenture or under the Notes (other than a
default specified in clause (a), (b) or (c) above), and such 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, as defined in the Indenture, occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding shall, declare all
the Notes to be due and payable. If a bankruptcy or insolvency default with
respect to the Company occurs and is continuing, the Notes automatically become
due and payable. Holders may not enforce the Indenture or the Notes except as
provided in the
<PAGE>
A-9
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
at least a majority in principal amount of the Notes then outstanding may direct
the Trustee in its exercise of any trust or power.
16. Collateral.
----------
The payment of the Notes will be secured by securities held in an account
to secure and fund the first six scheduled interest payments on the Notes. Once
the first six scheduled interest payments are made, the Notes will be unsecured.
17. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from and perform services for the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates as if
it were not the Trustee.
18. No Recourse Against Others.
--------------------------
No incorporator or any past, present or future partner, stockholder, other
equity holder, officer, director, employee or controlling person as such, of the
Company or of any successor Person shall have any liability for any obligations
of the Company under the Pledge Agreement, the Notes or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
19. Authentication.
--------------
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
20. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish a copy of the Indenture to any Holder upon written
request and without charge. Requests may be made to ITC/\DeltaCom, Inc., 206
West 9th Street, West Point, GA 31833; Attention: Chief Financial Officer.
<PAGE>
A-10
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
---------------------------------------------------------------------
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES OTHER THAN EXCHANGE NOTES,
PERMANENT OFFSHORE GLOBAL NOTES AND
PERMANENT OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date the Shelf Registration Statement is
declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933 provided by Rule
144A thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the
Indenture.
<PAGE>
A-11
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date:
------------ ------------------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933 and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
----------- ------------------------------------------------------
NOTICE: To be executed by an executive officer
<PAGE>
A-12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.10 or 4.11 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the Company pursuant
to Section 4.10 or 4.11 of the Indenture, state the amount: $ .
----------------
Date:
---------------
Your Signature:
----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this
Note)
Signature Guarantee:
------------------------------
<PAGE>
EXHIBIT B
---------
Form of Certificate
-------------------
-------, ----
United States Trust Company
of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Department
Re: ITC/\DeltaCom, Inc. (the "Company")
11% Senior Notes due 2007 (the "Notes")
---------------------------------------
Dear Sirs:
This letter relates to U.S. $ principal amount of Notes
---------------
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.01 of
the Indenture dated as of June 3, 1997 (the "Indenture") relating to the Notes,
we hereby certify that we are (or we will hold such securities on behalf of) a
person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933. Accordingly, you are hereby requested to exchange the legended
certificate for an unlegended certificate representing an identical principal
amount of Notes, all in the manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
-----------------------------------------------
Authorized Signature
<PAGE>
EXHIBIT C
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
-------, ----
United States Trust Company
of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Department
Re: ITC/\DeltaCom, Inc. (the "Company")
11% Senior Notes due 2007 (the "Notes")
---------------------------------------
Dear Sirs:
In connection with our proposed purchase of $
------------------
aggregate principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as of
June 3, 1997 (the "Indenture"), relating to the Notes, and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the Securities
Act of 1933 (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell any Notes, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter, (D) outside
the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing any of the Notes from us a notice advising such
purchaser that resales of the Notes are restricted as stated herein.
<PAGE>
C-2
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
-------------------------------
Authorized Signature
<PAGE>
EXHIBIT D
---------
Form of Certificate to Be Delivered in
Connection with Transfers Pursuant to Regulation S
-----------------------------------------------------
-------, ----
United States Trust Company
of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Department
Re: ITC/\DeltaCom, Inc. (the "Company")
11% Senior Notes due 2007 (the "Notes")
---------------------------------------
Dear Sirs:
In connection with our proposed sale of U.S.$ aggregate
------------------
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of 1933
and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United States;
(2) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
<PAGE>
D-2
By:
-----------------------------
Authorized Signature
<PAGE>
Exhibit 4.2
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated June 3, 1997
between
ITC/\DELTACOM, INC.
and
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
FIRST UNION CAPITAL MARKETS CORP.
NATIONSBANC CAPITAL MARKETS, INC.
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into June 3, 1997, between ITC/\DeltaCom, Inc., a Delaware corporation
(the "Company"), and MORGAN STANLEY & CO. INCORPORATED, MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED, FIRST UNION CAPITAL MARKETS CORPORATION and
NATIONSBANC CAPITAL MARKETS, INC. (the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement dated May
29, 1997, between the Company and the Placement Agents (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agents
of an aggregate of $200,000,000 principal amount of the Company's 11% Senior
Notes due 2007 (the "Securities"). In order to induce the Placement Agents to
enter into the Placement Agreement, the Company has agreed to provide to the
Placement Agents and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
--------
to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
--------
from time to time.
"Closing Date" shall mean the Closing Date as defined in the Placement
------------
Agreement.
"Company" shall have the meaning set forth in the preamble to this
-------
Agreement and shall also include the Company's successors.
"Counsel for the Holders" shall mean, with respect to any Registration
-----------------------
Statement, one counsel selected by the Holders of a majority in principal
amount of Registrable Securities covered by such Registration Statement.
<PAGE>
2
"Exchange Offer" shall mean the exchange offer by the Company of
--------------
Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
---------------------------
Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
-------------------------------------
registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Exchange Securities" shall mean securities issued by the Company
-------------------
under the Indenture containing terms identical to the Securities (except
that the Exchange Securities will not contain restrictions on transfer) and
to be offered to Holders of Securities in exchange for Securities pursuant
to the Exchange Offer.
"Holder" shall mean the Placement Agents, for so long as they own any
------
Registrable Securities, and each of their successors, assigns and direct
and indirect transferees who become registered owners of Registrable
Securities under the Indenture; provided that for purposes of Sections 4
--------
and 5 hereof, the term "Holder" shall include Participating Broker-Dealers
(as defined in Section 4(a)).
"Indenture" shall mean the Indenture relating to the Securities dated
---------
as of the Closing Date between the Company and United States Trust Company
of New York, trustee, and as the same may be amended from time to time in
accordance with the terms thereof.
"Majority Holders" shall mean the Holders of a majority of the
----------------
aggregate principal amount of outstanding Registrable Securities; provided
--------
that whenever the consent or approval of Holders of a specified percentage
of Registrable Securities is required hereunder, Registrable Securities
held by the Company or any of its affiliates (as such term is defined in
Rule 405 under the 1933 Act) (other than the Placement Agents or subsequent
holders of Registrable Securities if such subsequent holders are deemed to
be such affiliates solely by reason of their holding of such Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage or amount.
"Person" shall mean an individual, partnership, corporation, trust or
------
unincorporated organization or other entity, or a government or agency or
political subdivision thereof.
<PAGE>
3
"Placement Agents" shall have the meaning set forth in the preamble to
----------------
this Agreement.
"Placement Agreement" shall have the meaning set forth in the preamble
-------------------
to this Agreement.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to such prospectus,
and in each case including all material incorporated by reference therein.
"Registrable Securities" shall mean the Securities; provided, however,
---------------------- -------- -------
that the Securities shall cease to be Registrable Securities (i) when a
Registration Statement with respect to such Securities shall have been
declared effective under the 1933 Act and such Securities shall have been
disposed of pursuant to such Registration Statement, (ii) when such
Securities have been sold to the public pursuant to Rule 144 (or any
provision similar to Rule 144 then in force, but not Rule 144A) under the
1933 Act or (iii) when such Securities shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or
blue sky laws (including reasonable fees and disbursements of counsel for
any underwriters or Holders in connection with blue sky qualification of
any of the Exchange Securities or Registrable Securities), (iii) all
expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency
fees, (v) all fees and disbursements relating to the qualification of the
Indenture under applicable securities laws, (vi) the fees and disbursements
of the Trustee and its counsel, (vii) the fees and disbursements of counsel
for the Company and, in the case of a Shelf Registration Statement, the
fees and disbursements of one counsel for the Holders (which counsel shall
be selected by the Majority Holders and which counsel may also be counsel
for the Placement Agents) and (viii) the fees and disbursements of the
independent public accountants of the Company, including the
<PAGE>
4
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, but excluding fees and
expenses of counsel to the underwriters (other than fees and expenses set
forth in clause (ii) above) or the Holders and underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition
of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the
----------------------
Company that covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement and all amendments
and supplements to any such Registration Statement, including post-
effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission.
---
"Shelf Registration" shall mean a registration effected pursuant to
------------------
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
----------------------------
statement of the Company pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Securities (but no other
securities unless approved by the Holders whose Registrable Securities are
covered by such Shelf Registration Statement) on an appropriate form under
Rule 415 under the 1933 Act, or any similar rule that may be adopted by the
SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Trustee" shall mean the trustee with respect to the Securities under
-------
the Indenture.
"Underwritten Offering" shall mean a registration in which Registrable
---------------------
Securities are sold to an Underwriter (as hereinafter defined) for
reoffering to the public.
2. Registration Under the 1933 Act.
-------------------------------
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall use its best efforts
to cause to be filed, no later than 60 days after the Closing Date, an Exchange
Offer Registration Statement covering the offer by the Company to the Holders to
exchange all of the Registrable Securities for
<PAGE>
5
Exchange Securities and to have such Registration Statement remain effective
until the closing of the Exchange Offer. The Company shall commence the Exchange
Offer promptly after the Exchange Offer Registration Statement has been declared
effective by the SEC and use its best efforts to have the Exchange Offer
consummated not later than 60 days after such effective date. The Company shall
commence the Exchange Offer by mailing the Prospectus related to the Exchange
Offer and accompanying documents to each Holder stating, in addition to such
other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period of
at least 20 business days from the date such notice is mailed) (the
"Exchange Dates");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest in accordance with its terms,
but will not retain any rights under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security exchanged
pursuant to the Exchange Offer will be required to surrender such
Registrable Security, together with the enclosed letters of transmittal, to
the institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice prior to the close of
business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last Exchange Date, by sending to
the institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Registrable Securities delivered for exchange and a statement
that such Holder is withdrawing his election to have such Securities
exchanged.
As soon as practicable after the last Exchange Date, the Company
shall:
(i) accept for exchange Registrable Securities or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted for
exchange by the Company and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an
<PAGE>
6
Exchange Security equal in principal amount to the principal amount of the
Registrable Securities surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Company shall inform the
Placement Agents of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Placement Agents shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the Exchange
Offer Registration provided for in Section 2(a) above is not available or may
not be consummated as soon as practicable after the last Exchange Date because
it would violate applicable law or the applicable interpretations of the Staff
of the SEC, (ii) the Exchange Offer is not for any other reason consummated by
December 3, 1997 or (iii) the Exchange Offer has been completed and in the
opinion of counsel for the Placement Agents a Registration Statement must be
filed and a Prospectus must be delivered by the Placement Agents in connection
with any offering or sale by them of Registrable Securities which they acquired
from the Company, the Company shall use its best efforts to cause to be filed as
soon as practicable after such determination, date or notice of such opinion of
counsel is given to the Company, as the case may be, a Shelf Registration
Statement providing for the sale by the Holders of all of the Registrable
Securities and to have such Shelf Registration Statement declared effective by
the SEC. In the event the Company is required to file a Shelf Registration
Statement solely as a result of the matters referred to in clause (iii) of the
preceding sentence, the Company shall file and use its best efforts have
declared effective by the SEC both an Exchange Offer Registration Statement
pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf
Registration Statement (which may be a combined Registration Statement with the
Exchange Offer Registration Statement) with respect to offers and sales of
Registrable Securities held by the Placement Agents after completion of the
Exchange Offer. The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective until expiration of the period
referred to in Rule 144(k) under the 1933 Act with respect to all Registrable
Securities covered by the Shelf Registration Statement or such shorter period
that will terminate when all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement. The Company further agrees to supplement or amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the 1933 Act or by any other rules and regulations
thereunder for shelf registration or if reasonably requested by a Holder with
respect to information relating to
<PAGE>
7
such Holder, and to use its best efforts to cause any such amendment to become
effective and such Shelf Registration Statement to become usable as soon as
thereafter practicable. The Company agrees to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
(c) The Company shall pay all Registration Expenses in connection with
the registration pursuant to Section 2(a) or Section 2(b). Each Holder shall
pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that, if, after it has been declared effective, the
-------- -------
offering of Registrable Securities pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of such
interference until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume. As provided for in the Indenture, in
the event that the Exchange Offer is not consummated and, if a Shelf
Registration Statement is required hereby, the Shelf Registration Statement is
not declared effective on or prior to December 3, 1997, the interest rate on the
Securities (and the Exchange Securities) will increase by .5% per annum until
the date the Exchange Offer is consummated or a Shelf Registration Statement is
declared effective.
(e) Without limiting the remedies available to the Placement Agents
and the Holders, the Company acknowledges that any failure by the Company to
comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Placement Agents or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Placement Agents or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
3. Registration Procedures.
-----------------------
In connection with the obligations of the Company with respect to the
Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the
Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by
the Company
<PAGE>
8
and (y) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Securities by the selling Holders thereof and (z)
shall comply as to form in all material respects with the requirements of
the applicable form and include all financial statements required by the
SEC to be filed therewith, and use its best efforts to cause such
Registration Statement to become effective and remain effective in
accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus supplement and, as
so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; and
keep each Prospectus current during the period described under Section 4(3)
and Rule 174 under the 1933 Act that is applicable to transactions by
brokers or dealers with respect to the Registrable Securities or Exchange
Securities;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, to counsel for the Placement Agents, to counsel for
the Holders and to each Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or Underwriter
may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities; and (subject to the penultimate
paragraph of this Section 3) the Company consents to the use of such
Prospectus and any amendment or supplement thereto in accordance with
applicable law by each of the selling Holders of Registrable Securities and
any such Underwriters in connection with the offering and sale of the
Registrable Securities covered by and in the manner described in such
Prospectus or any amendment or supplement thereto in accordance with
applicable law;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with such Holder in connection with any filings required to be
made with the National Association of Securities Dealers, Inc. and do any
and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
--------
however, that the Company shall not be required to (i) qualify as a foreign
-------
corporation or as a dealer in securities in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(d), (ii) file
any
<PAGE>
9
general consent to service of process or (iii) subject itself to taxation
in any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the
Placement Agents promptly and, if requested by any such Holder or counsel,
confirm such advice in writing (i) when a Registration Statement has become
effective and when any post-effective amendment thereto has been filed and
becomes effective, (ii) of any request by the SEC or any state securities
authority for amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration Statement
and the closing of any sale of Registrable Securities covered thereby, the
representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material
respects or if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose, (v)
of the happening of any event during the period a Shelf Registration
Statement is effective which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or which
requires the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein not misleading in any
material respect and (vi) of any determination by the Company that a post-
effective amendment to a Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide prompt notice to each Holder of the withdrawal
of any such order;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends and enable such Registrable Securities
to be in such denominations (consistent with the provisions of the
Indenture) and registered in such names as the selling Holders may
<PAGE>
10
reasonably request at least one business day prior to the closing of any
sale of Registrable Securities;
(i) in the case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(v) hereof, use its best efforts to
prepare and file with the SEC a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Company agrees to notify the Holders to suspend
use of the Prospectus as promptly as practicable after the occurrence of
such an event, and the Holders hereby agree to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of such
document to the Placement Agents and their counsel (and, in the case of a
Shelf Registration Statement, the Counsel for the Holders) and make such of
the representatives of the Company as shall be reasonably requested by the
Placement Agents or their counsel (and, in the case of a Shelf Registration
Statement, Counsel for the Holders) available for discussion of such
document, and shall not at any time file or make any amendment to the
Registration Statement, any Prospectus or any amendment of or supplement to
a Registration Statement or a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus, of
which the Placement Agents and their counsel (and, in the case of a Shelf
Registration Statement, Counsel for the Holders) shall not have previously
been advised and furnished a copy or to which the Placement Agents or their
counsel (and, in the case of a Shelf Registration Statement, Counsel for
the Holders) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be,
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture
<PAGE>
11
to be so qualified in accordance with the terms of the TIA and execute, and
use its best efforts to cause the Trustee to execute, all documents as may
be required to effect such changes and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, upon the execution of
customary confidentiality agreements reasonably satisfactory to the
Company, make available for inspection by a representative of the Holders
of the Registrable Securities, any Underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and attorneys
and accountants designated by the Holders, at reasonable times and in a
reasonable manner, all financial and other records, pertinent documents and
properties of the Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably requested by
and customarily given by an issuer to any such representative, Underwriter,
attorney or accountant in connection with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use its best efforts to cause
all Registrable Securities to be listed on any securities exchange or any
automated quotation system on which similar securities issued by the
Company are then listed if requested by the Majority Holders, to the extent
such Registrable Securities satisfy applicable listing requirements;
(o) use its best efforts to cause the Exchange Securities or
Registrable Securities, as the case may be, to be rated by two nationally
recognized statistical rating organizations (as such term is defined in
Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder of Registrable Securities
covered by a Shelf Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information with
respect to such Holder as such Holder reasonably requests to be included
therein and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as the Company has received
notification of the matters to be incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into such customary
agreements and take all such other actions in connection therewith
(including those requested by the Holders of a majority in principal amount
of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, including but
not limited to an Underwritten Offering, and in such connection, (i) to the
extent possible, make such representations and warranties to the Holders
and any Underwriters of such Registrable Securities with respect to the
business of the Company and its subsidiaries, the Registration Statement,
Prospectus and documents
<PAGE>
12
incorporated by reference therein or deemed incorporated by reference
therein, if any, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested, (ii) use its best efforts to obtain
opinions of counsel to the Company (which counsel and opinions, in form,
scope and substance, shall be reasonably satisfactory to the Holders of a
majority in principal amount of the Registrable Securities being sold and
such Underwriters and their respective counsel) addressed to each selling
Holder and Underwriter of Registrable Securities, covering the matters
customarily covered in opinions requested in underwritten offerings, (iii)
use its best efforts to obtain "cold comfort" letters from the independent
certified public accountants of the Company (and, if necessary, any other
certified public accountant of any subsidiary of the Company, or of any
business acquired by the Company for which financial statements and
financial data are or are required to be included in the Registration
Statement) addressed to each selling Holder and Underwriter of Registrable
Securities, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings, and (iv) deliver such documents and certificates as
may be reasonably requested by the Holders of a majority in principal
amount of the Registrable Securities being sold or the Underwriters, and
which are customarily delivered in underwritten offerings, to evidence the
continued validity of the representations and warranties of the Company
made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may require
each Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing. No Holder of Registrable Securities may include its Registrable
Securities in such Shelf Registration Statement unless and until such Holder
furnishes such information to the Company. Each Holder including Registrable
Securities in a Shelf Registration shall agree promptly to furnish to the
Company any information regarding such Holder and the proposed distribution by
such Holder of such Registrable Securities required to make the information
previously furnished to the Company by such Holder not materially misleading.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 3(e)(v) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by
the Company, such Holder will deliver to the Company (at the Company's expense)
all copies in such Holder's possession, other than permanent file copies then in
such Holder's
<PAGE>
13
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice. If the Company shall give any such notice to
suspend the disposition of Registrable Securities pursuant to a Registration
Statement, the Company shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such disposition. The
Company may give any such notice so long as there are no more than 90 days in
any 365 day period in which such suspensions are in effect.
The Holders of Registrable Securities covered by a Shelf Registration
Statement who desire to do so may sell such Registrable Securities in an
Underwritten Offering. In any such Underwritten Offering, the investment banker
or investment bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering; provided that such investment
--------
banker or investment bankers and manager or managers shall be reasonably
acceptable to the Company.
4. Participation of Broker-Dealers in Exchange Offer.
--------------------------------------------------
(a) The Company understands that the Staff of the SEC has taken the
position that any broker-dealer that receives Exchange Securities for its own
account in the Exchange Offer in exchange for Securities that were acquired by
such broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker-Dealers may resell the Exchange Securities, without
naming the Participating Broker-Dealers or specifying the amount of Exchange
Securities owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligation under the 1933
Act in connection with resales of Exchange Securities for their own accounts, so
long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of
this Agreement, the Company agrees that the provisions of this Agreement as they
relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Placement Agents or
<PAGE>
14
by one or more Participating Broker-Dealers, in each case as provided in clause
(ii) below, in order to expedite or facilitate the disposition of any Exchange
Securities by Participating Broker-Dealers consistent with the positions of the
Staff recited in Section 4(a) above; provided that:
--------
(i) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement, as would
otherwise be contemplated by Section 3(i), for a period exceeding 180 days
after the last Exchange Date (as such period may be extended pursuant to
the penultimate paragraph of Section 3 of this Agreement) and Participating
Broker-Dealers shall not be authorized by the Company to deliver and shall
not deliver such Prospectus after such period in connection with the
resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures set forth in
Section 3 of this Agreement to an Exchange Offer Registration, to the
extent not required by the positions of the Staff of the SEC or the 1933
Act and the rules and regulations thereunder, will be in conformity with
the reasonable request to the Company by the Placement Agents or with the
reasonable request in writing to the Company by one or more broker-dealers
who certify to the Placement Agents and the Company in writing that they
anticipate that they will be Participating Broker-Dealers; and provided
--------
further that, in connection with such application of the Shelf Registration
-------
procedures set forth in Section 3 to an Exchange Offer Registration, the
Company shall be obligated (x) to deal only with one entity representing
the Participating Broker-Dealers, which shall be Morgan Stanley & Co.
Incorporated unless it elects not to act as such representative, (y) to pay
the fees and expenses of only one counsel representing the Participating
Broker-Dealers, which shall be counsel to the Placement Agents unless such
counsel elects not to so act, and (z) to cause to be delivered only one, if
any, "cold comfort" letter with respect to the Prospectus in the form
existing on the last Exchange Date and with respect to each subsequent
amendment or supplement, if any, effected during the period specified in
clause (i) above.
(c) The Placement Agents shall have no liability to the Company or any
Holder with respect to any request that it may make pursuant to Section 4(b)
above.
5. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless the Placement
Agents, each Holder and each Person, if any, who controls any Placement Agent or
any Holder within the meaning of either Section 15 of the 1933 Act or Section 20
of the 1934 Act, or is under common control with, or is controlled by, any
Placement Agent or any Holder, from and against all losses, claims, damages and
liabilities (including, without limitation, any
<PAGE>
15
legal or other expenses reasonably incurred by any Placement Agent, any Holder
or any such controlling or affiliated Person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the 1933 Act, including all
documents incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading, except (i) insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission based upon information relating to the Placement Agents or any
Holder furnished to the Company in writing by the Placement Agents or any
selling Holder expressly for use therein and (ii) in the case of a Shelf
Registration, that the Company shall not be liable to any indemnified party
under the provisions of this Section 5 with respect to any preliminary
Prospectus to the extent that any such loss, claim, damage or liability results
from the fact that such indemnified party sold securities to a person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a final Prospectus (if the Company had previously furnished copies thereof
to the indemnified party), if the loss, claim, damage or liability of such
indemnified party results from an untrue statement or alleged untrue statement
or an omission or alleged omission contained in the preliminary Prospectus that
was corrected in the final Prospectus. In connection with any Underwritten
Offering permitted by Section 3, the Company will also indemnify the
Underwriters, if any, selling brokers, dealers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of either Section
15 of the 1933 Act or Section 20 of the 1934 Act) to the same extent as provided
above with respect to the indemnification of the Holders, if requested in
connection with any Registration Statement.
(b) Each Holder (including a Placement Agent that is a Holder) agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
Placement Agents and the other selling Holders, and each of their respective
directors, each officer of the Company who signed the Registration Statement and
each Person, if any, who controls the Company, any of the Placement Agents and
any other selling Holder within the meaning of either Section 15 of the 1933 Act
or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from
the Company to the Placement Agents and the Holders, but only with reference to
information relating to such Holder furnished to the Company in writing by such
Holder expressly for use in any Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto).
<PAGE>
16
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agents and all
Persons, if any, who control any Placement Agent within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
the Company, its directors, its officers who signed the Registration Statement
and each Person, if any, who controls the Company within the meaning of either
such Section and (c) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Holders and all Persons, if any, who
control any Holders within the meaning of either such Section, and that all such
fees and expenses shall be reimbursed as they are incurred. In such case
involving the Placement Agents and Persons who control any Placement Agent, such
firm shall be designated in writing by Morgan Stanley & Co. Incorporated. In
such case involving the Holders and such Persons who control Holders, such firm
shall be designated in writing by the Majority Holders. In all other cases, such
firm shall be designated by the Company. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but, if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party for such fees and expenses of
counsel in accordance with such request prior to the date of such settlement. No
<PAGE>
17
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or paragraph
(b) of this Section 5 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 5(d) are several
in proportion to the respective number of Registrable Securities of such Holder
that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Securities
were sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
<PAGE>
18
The indemnity and contribution provisions contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Placement Agents, any Holder or any Person controlling any Placement Agent
or any Holder, or by or on behalf of the Company, its officers or directors or
any Person controlling the Company, (iii) acceptance of any of the Exchange
Securities and (iv) any sale of Registrable Securities pursuant to a Shelf
Registration Statement.
6. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not entered into,
--------------------------
and on or after the date of this Agreement will not enter into, any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; provided, however, that no amendment, modification,
-------- -------
supplement, waiver or consent to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery
(i) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agents,
the address set forth in the Placement Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Placement Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
<PAGE>
19
Copies of all such notices, demands or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
--------
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such person shall be entitled to receive the benefits hereof. The
Placement Agents (in their capacity as Placement Agents) shall have no liability
or obligation to the Company with respect to any failure by a Holder to comply
with, or any breach by any Holder of, any of the obligations of such Holder
under this Agreement.
(e) Purchases and Sales of Securities. The Company shall not, and
---------------------------------
shall use its best efforts to cause its affiliates (as defined in Rule 405 under
the 1933 Act) not to, purchase and then resell or otherwise transfer any
Securities.
(f) Third Party Beneficiary. Each Holder shall be a third party
-----------------------
beneficiary to the agreements made hereunder between the Company, on the one
hand, and the Placement Agents, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of New York.
<PAGE>
20
(j) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE>
21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ITC/\DeltaCom, Inc.
By /s/ Andrew Walker
----------------------------
Name: Andrew Walker
Title: Chief Executive Officer
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
FIRST UNION CAPITAL MARKETS CORP.
NATIONSBANC CAPITAL MARKETS, INC.
By: MORGAN STANLEY & CO. INCORPORATED
By /s/ Robert Shepardson
-------------------------
Name: Robert Shepardson
Title: Principal
<PAGE>
Exhibit 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
----------
<PAGE>
T A B L E O F C O N T E N T S
- - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Definitions; Appointment; Deposit and Investment................ 2
1.1. Definitions..................................................... 2
1.2. Appointment of the Trustee...................................... 4
1.3. Pledge and Grant of Security Interest........................... 4
1.4. Deposit of Funds................................................ 5
SECTION 2. Security for Obligation......................................... 5
SECTION 3. Delivery of Collateral.......................................... 5
SECTION 4. Maintaining the Cash Collateral Account......................... 5
SECTION 5. Investing of Amounts in the Cash Collateral Account............. 6
SECTION 6. Delivery of Collateral Investments; Filing...................... 6
SECTION 7. Disbursements................................................... 7
SECTION 8. Representations and Warranties.................................. 10
SECTION 9. Further Assurances.............................................. 12
SECTION 10. Covenants....................................................... 12
SECTION 11. Power of Attorney............................................... 13
SECTION 12. No Assumption of Duties; Reasonable Care........................ 14
SECTION 13. Indemnity....................................................... 14
SECTION 14. Remedies upon Event of Default.................................. 15
SECTION 15. Expenses........................................................ 16
SECTION 16. Security Interest Absolute...................................... 16
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
SECTION 17. Miscellaneous Provisions........................................ 16
17.1. Notices......................................................... 16
17.2. No Adverse Interpretation of Other Agreements................... 17
17.3. Severability.................................................... 17
17.4. Headings........................................................ 17
17.5. Counterpart Originals........................................... 17
17.6. Benefits of Pledge and Security Agreement....................... 17
17.7. Amendments, Waivers and Consents................................ 17
17.8. Interpretation of Agreement..................................... 18
17.9. Continuing Security Interest; Termination....................... 18
17.10. Survival Provisions............................................. 18
17.11. Waivers......................................................... 19
17.12. Authority of the Trustee........................................ 19
17.13. Intentionally Omitted........................................... 19
17.14. Final Expression................................................ 19
17.15. Rights of Holders of the Notes.................................. 20
17.16. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL; WAIVER OF DAMAGES................................ 20
</TABLE>
<PAGE>
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This PLEDGE AND SECURITY AGREEMENT (this "Pledge and Security
-------------------
Agreement") is made and entered into as of June 3, 1997 by and among
- ---------
ITC/\DELTACOM, Inc., a Delaware corporation (the "Pledgor"), having its
-------
principal office at 206 West Ninth Street, West Point, Georgia, 31833, ITC
HOLDING COMPANY, INC., each of the Reorganization Subsidiaries (as defined
herein), MORGAN STANLEY & CO. INCORPORATED, MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED, FIRST UNION CAPITAL MARKETS CORP. and NATIONSBANC CAPITAL
MARKETS, INC., acting as the Placement Agents (collectively, the "Placement
---------
Agents"), in favor of UNITED STATES TRUST COMPANY OF NEW YORK, a banking and
- ------
trust company duly organized and existing under the laws of the State of New
York ("U.S. Trust"), having an office at 114 West 47th Street, New York, NY
----
10036, as trustee (the "Trustee") for the holders (the "Holders") of the Notes
------- -------
(as defined herein) issued by the Pledgor under the Indenture referred to below.
W I T N E S S E T H
WHEREAS, the Pledgor and the Placement Agents are parties to a
Placement Agreement dated May 29, 1997 (the "Placement Agreement"), pursuant to
-------------------
which the Pledgor will issue and sell to the Placement Agents $200,000,000 in
aggregate principal amount of 11% Senior Notes due 2007 (the "Notes");
-----
WHEREAS, the Pledgor and the Trustee, have entered into that certain
indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
---------
Pledgor is issuing the Notes on the date hereof;
WHEREAS, pursuant to the Placement Agreement and the Indenture, the
Pledgor is required to direct that on the Closing Date (as defined in the
Placement Agreement) $194,000,000 (the "Funds") be deposited with the Trustee to
-----
be held by the Trustee for the benefit of the Holders of the Notes to secure the
Pledgor's obligation to (i) provide for payment in full of the first six
scheduled interest payments due on the Notes, (ii) secure repayment of the
principal, premium and interest on the Notes in the event that the Notes become
due and payable prior to such time as the first six scheduled interest payments
thereon shall have been paid in full and (iii) redeem all of the Notes in the
event that the Reorganization (as defined in the Indenture) is not consummated
or certain other conditions are not satisfied, or if appears in the sole
judgement of the Pledgor that the Reorganization will not
<PAGE>
2
be consummated or such other conditions will not be satisfied, by September 15,
1997 (the "Termination Date") (collectively, the "Obligations"); and
----------- -----------
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor has
agreed to (i) pledge to the Trustee for its benefit and the ratable benefit of
the Holders of the Notes, a security interest in the Funds and other Collateral
(as hereinafter defined) and (ii) execute and deliver this Pledge and Security
Agreement in order to secure the payment and performance by the Pledgor of all
the Obligations.
AGREEMENT
NOW, THEREFORE, in consideration of the promises herein contained, and
in order to induce the Holders of the Notes to purchase the Notes, the Pledgor,
the Placement Agents and the Trustee hereby agree, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
------------------------------------------------
1.1. Definitions.
-----------
"Cash Collateral Account" means an account established and maintained
-----------------------
by the Trustee in the name "UST Tstee ITC Sr Nts Cash Collatl," which
account shall at all times be under the sole dominion and control of the
Trustee and subject to the terms and conditions of this Pledge and Security
Agreement.
"Cash Equivalents" means any of the following investments, to the
----------------
extent owned free and clear of all liens other than liens created
hereunder: (a) U.S. Government Obligations and (b) commercial paper in an
aggregate amount of no more than $5 million per issuer outstanding at any
time, issued by any corporation organized under the laws of any State of
the United States and 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 Standard & Poor's Ratings Service; provided that prior to the
consummation of the Reorganization, no such investment shall mature after
the Termination Date.
"First Union Release" shall mean an agreement, document or instrument
-------------------
executed by First Union National Bank of North Carolina, CoBank, ACB or
other authorized person pursuant to or in connection with the Credit
Agreement (the "Credit Agreement"), dated as of January 29, 1996, by and
----------------
among Valley Finance, Inc., ITC Holding Company, Inc. and certain
subsidiaries of ITC Holding Company, Inc., including certain of the
Reorganization Subsidiaries, as borrowers, the Lenders referred
<PAGE>
3
to therein, First Union National Bank of North Carolina, as Administrative
Agent, and CoBank, ACB, as Documentation Agent, which shall (i) irrevocably
release from the lien of the Credit Agreement and any related notes,
guarantees and collateral documents, including any agreements, instruments
or documents executed and delivered pursuant to or in connection therewith,
all of the property and assets of the Reorganization Subsidiaries and all
of the capital stock or other ownership interests in the Reorganization
Subsidiaries, (ii) irrevocably release the Reorganization Subsidiaries as
obligors under, and from and against all other obligations incurred under
or in respect of, the Credit Agreement and any related notes, guarantees
and collateral documents, including any agreements, instruments or
documents executed and delivered pursuant to or in connection therewith,
and (iii) irrevocably release the Reorganization Subsidiaries from any
obligation to comply with any term, provision or condition in the Credit
Agreement and any related notes, guarantees and collateral documents,
including any agreements, instruments or documents executed and delivered
pursuant to or in connection therewith.
"Government Book-Entry Security" means U.S. Government Obligations
------------------------------
maintained in book-entry form through the United States Federal Reserve
Banks pursuant to (A) the United States Treasury Department regulations
codified at 31 C.F.R. Part 357, as modified by the amendments promulgated
at 61 Fed. Reg. 43, 626-43, 638 (Aug. 23, 1996), or (B) substantially
identical regulations promulgated by any other agency or instrumentality of
the United States whose securities qualify as "U.S. Government Obligations"
hereunder.
"Material Regulatory Approvals" shall mean (i) all consents and
-----------------------------
approvals required by the Federal Communications Commission and any other
federal governmental authority or agency and (ii) all consents and
approvals required by the state public utilities commissions of Alabama,
Florida, Georgia, Louisiana, Mississippi, North Carolina and South Carolina
and any other state governmental authority or agency in any such state, in
each case with respect to consummation of the Reorganization.
"Officer's Certificate" shall mean a certificate signed by the
---------------------
President or any Vice President of the Pledgor stating that (i) the
Reorganization has been consummated; (ii) all Material Regulatory Approvals
have been received; (iii) the First Union Release has been obtained; and
(iv) consummation of the Reorganization does not violate or conflict with
or give rise to a right to terminate any material agreement or instrument
to which the Pledgor, any of the Reorganization Subsidiaries or any of
their subsidiaries is a party.
<PAGE>
4
"Opinion of Counsel" shall mean, collectively, (i) an opinion of Hogan
------------------
& Hartson L.L.P. substantially in the form attached hereto as Exhibit A-1,
(ii) an opinion of Brantley & Wilkerson, P.C. substantially in the form
attached hereto as Exhibit A-2 and (iii) an opinion of Stowers, Hayes,
Clark & Roane substantially in the form attached hereto as Exhibit A-3.
"Reorganization Subsidiaries" means Deltacom, Inc., Eastern Telecom,
---------------------------
Inc., ITC Transmission Systems, Inc., ITC Transmission Systems II, Inc.,
Interstate FiberNet and Gulf States Transmission Systems, Inc.
"Trustee" shall mean the Person named as the "Trustee" in the first
-------
paragraph of this Agreement until a successor Trustee shall have become
such, and thereafter "Trustee" shall mean the Person who is then the
Trustee hereunder.
"U.S. Government Obligations" means securities that are (i) direct
---------------------------
obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United
States of America the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America.
All capitalized terms used herein without definition shall have the
respective meanings ascribed to them in the Indenture. Unless otherwise defined
herein or in the Indenture, (i) terms used in Articles 8 or 9 of the Uniform
Commercial Code as in effect in the State of New York (the "U.C.C.") are used
-----
herein as therein defined and (ii) terms used in "Revised Article 8," as such
term is defined in 31 C.F.R. (S) 357.2, as modified by the amendments
promulgated at 61 Fed. Reg. 43, 628 (Aug. 23, 1996), are used herein as therein
defined.
<PAGE>
5
1.2. Appointment of the Trustee. The Pledgor and the Placement
--------------------------
Agents hereby appoint the Trustee as Trustee in accordance with the terms and
conditions set forth herein and the Trustee hereby accepts such appointment.
1.3. Pledge and Grant of Security Interest. The Pledgor hereby
-------------------------------------
pledges to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, and grants to the Trustee for its benefit and for the
ratable benefit of the Holders of the Notes, a continuing first priority
security interest in and to all of the Pledgor's right, title and interest in,
to and under the following (hereinafter collectively referred to as the
"Collateral"), whether characterized as certificated securities, uncertificated
- -----------
securities, investment property, general intangibles or otherwise: (a) the Cash
Collateral Account, all funds held therein and all certificates and instruments,
if any, from time to time representing or evidencing the Cash Collateral
Account, (b) the Collateral Investments Account and all Collateral Investments
(as hereinafter defined) and all certificates and instruments, if any,
representing or evidencing the Collateral Investments, and any and all security
entitlements to the Collateral Investments, and any and all related securities
accounts in which security entitlements to the Collateral Investments are
carried, (c) all cash, notes, certificates of deposit, deposit accounts, checks
and other instruments from time to time hereafter delivered to or otherwise
possessed by the Trustee for or on behalf of the Pledgor in substitution for or
in addition to any or all the then existing Collateral, and (d) all proceeds of
and other distributions on or with respect to any of the foregoing (and any
other proceeds or distributions), including, without limitation, all dividends,
interest, principal payments, cash, options, warrants, rights, instruments,
subscriptions and other property or proceeds from time to time received,
receivable or otherwise distributed or distributable in respect of or in
exchange for any of the foregoing or any security entitlement thereto.
1.4. Deposit of Funds. On the Closing Date, Pledgor shall direct
----------------
that all Funds be deposited into the Cash Collateral Account.
SECTION 2. Security for Obligations. This Pledge and Security
------------------------
Agreement secures the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all the
Obligations.
SECTION 3. Delivery of Collateral. All certificates or instruments
----------------------
representing or evidencing the Collateral, including, without limitation,
amounts invested as provided in Section 5, shall be delivered to and held by or
on behalf of the Trustee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance sufficient to
establish and maintain in favor of the Trustee a valid security interest in such
Collateral, and
<PAGE>
6
shall be credited to a securities account (the "Collateral Investments Account")
------------------------------
designated by the Trustee.
SECTION 4. Maintaining the Cash Collateral Account. (a) So long as
---------------------------------------
any Obligation shall remain unpaid, the Cash Collateral Account shall be
maintained with the Trustee.
(b) It shall be a term and condition of the Cash Collateral Account,
notwithstanding any term or condition to the contrary in any other agreement
relating to the Cash Collateral Account, and except as otherwise provided by the
provisions of Section 7 and Section 14, that no amount (including interest on
Collateral Investments) shall be paid or released to or for the account of, or
withdrawn by or for the account of, the Pledgor or any other Person from the
Cash Collateral Account.
The Cash Collateral Account shall be subject to such applicable laws,
and such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or governmental authority, as may
now or hereafter be in effect.
SECTION 5. Investing of Amounts in the Cash Collateral Account. If
---------------------------------------------------
requested by the Pledgor, the Trustee will, subject to the provisions of Section
7 and Section 14, from time to time (a) invest amounts on deposit in the Cash
Collateral Account in such Cash Equivalents, each in the name of or for the
account of the Trustee, as the Pledgor may select and the Trustee may approve
and (b) invest interest paid on the Cash Equivalents referred to in clause (a)
above, and reinvest other proceeds of any such Cash Equivalents that may mature
or be sold, in each case in such Cash Equivalents, each in the name of or for
the account of the Trustee, as the Pledgor may select and the Trustee may
approve (the Cash Equivalents referred to in clauses (a) and (b) above being
collectively "Collateral Investments"); provided, however, that following
---------------------- -------- -------
disbursement of proceeds by the Trustee in accordance with Section 7(c), the
amount on deposit in the Collateral Investments Account must include U.S.
Government Obligations sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Pledgor, to provide for
the payment in full of the first six scheduled interest payments on all of the
Notes then outstanding. Interest and proceeds that are not invested or
reinvested in Collateral Investments as provided above shall be deposited and
held in the Cash Collateral Account. The Trustee shall in no event be liable
for any loss in the investment or reinvestment of amounts held in the Cash
Collateral Account.
SECTION 6. Delivery of Collateral Investments; Filing. (a) The
------------------------------------------
Trustee shall become the holder of the Collateral Investments (or applicable
security entitlements thereto) through the following delivery procedures: (i)
in the case of Collateral Investments which are certificated securities in
registered form, delivery of the applicable certificate(s), specially
<PAGE>
7
endorsed to the Trustee or registered in the name of the Trustee, to the
possession of (A) the Trustee, (B) a securities intermediary or financial
intermediary acting on behalf of the Trustee, or (C) another person, other than
a securities intermediary or financial intermediary, which person acknowledges
that it holds for the Trustee; (ii) in the case of Collateral Investments which
are uncertificated securities, registration of one of the following as owner of
such uncertificated securities: the Trustee or a person designated by the
Trustee, or person other than a securities intermediary or financial
intermediary, that becomes the registered owner of such uncertificated
securities and acknowledges that it holds the same for the Trustee; and (iii) in
the case of Collateral Investments in the form of Government Book-Entry
Securities, the making by a financial intermediary or securities intermediary
(other than a clearing corporation) to whose account such Government Book-Entry
Securities have been credited on the books of a Federal Reserve Bank (or on the
books of another such financial intermediary or securities intermediary (other
than a clearing corporation)), of book entries indicating that such Government
Book-Entry Securities have been credited to an account of the Trustee, and the
sending by such financial intermediary or securities intermediary to the Trustee
of confirmation of such transfer to the Trustee's account.
(b) Prior to receiving any Collateral Investments (or any security
entitlements thereto), as provided in subsection (a) of this Section 6, the
Trustee shall establish the Collateral Investments Account on its books as an
account segregated from all other custodial or collateral accounts at its office
at 114 West 47th Street, New York, NY 10036. Upon delivery of any Collateral
Investments to the Trustee (or the Trustee's acquisition of a security
entitlement thereto), the Trustee shall make appropriate book entries indicating
that such Collateral Investment and/or such security entitlement has been
credited to and is held in the Collateral Investments Account. Subject to the
terms and conditions of this Pledge and Security Agreement, all Collateral
Investments held by the Trustee pursuant to this Pledge and Security Agreement
shall be held in the Collateral Investments Account under exclusive dominion and
control of the Trustee and for the benefit of the Trustee and the ratable
benefit of the Holders of the Notes and segregated from all other funds or other
property otherwise held by the Trustee.
(c) All Collateral shall be retained in the Cash Collateral Account
and the Collateral Investments Account pending disbursement pursuant to the
terms hereof.
(d) Concurrently with the execution and delivery of this Pledge and
Security Agreement, the Pledgor is delivering to the Trustee acknowledgement
copies or stamped receipt copies of proper financing statements, duly filed on
or before the Closing Date in accordance with the Uniform Commercial Code as in
effect in the State of New York and the State of Georgia, covering the
categories of Collateral described in this Pledge and Security Agreement.
<PAGE>
8
SECTION 7. Disbursements. The Trustee shall hold the assets in the
-------------
Cash Collateral Account and the Collateral Investments Account and release the
same, or a portion thereof, only as follows:
(a) At least five Business Days prior to the due date of any of the
first six scheduled interest payments on the Notes, the Pledgor may,
pursuant to written instructions executed by the Pledgor (an "Issuer
------
Order"), direct the Trustee to release from the Cash Collateral Account,
and if necessary liquidate Collateral Investments in the Collateral
Investments Account indicated in the Issuer Order, and pay to the Holders
of the Notes funds sufficient to provide for payment in full of such
interest then due on the Notes. Upon receipt of an Issuer Order, the
Trustee will take any action necessary to provide for the payment of the
interest on the Notes in accordance with the payment provisions of the
Indenture to the Holders of the Notes from (and to the extent of) funds
available in the Cash Collateral Account and/or the Collateral Investments
Account. Nothing in this Section 7 shall affect the Trustee's rights to
apply the Collateral to the payments of amounts due on the Notes upon
acceleration thereof.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Collateral is security from a source of
funds other than the Cash Collateral Account and/or the Collateral
Investments Account ("Pledgor Funds"), the Pledgor may, after payment in
-------------
full of such interest payment or portion thereof from proceeds of the
Collateral or such Pledgor Funds or both, direct the Trustee to release to
the Pledgor or to another party at the direction of the Pledgor (the
"Pledgor's Designee") funds from the Cash Collateral Account, and if
------------------
necessary liquidate Collateral Investments in the Collateral Investments
Account indicated in the Issuer Order, in an amount less than or equal to
the amount of Pledgor Funds applied to such interest payment. Upon receipt
of an Issuer Order by the Trustee, the Trustee shall pay over to the
Pledgor or the Pledgor's Designee, as the case may be, the requested amount
from funds in the Cash Collateral Account and/or the Collateral Investments
Account. Concurrently with any release of funds to the Pledgor pursuant to
this Section 7(b), the Pledgor shall deliver to the Trustee a certificate
signed by an officer of the Pledgor stating that such release has been duly
authorized by the Pledgor and will not contravene any provision of
applicable law or the Certificate of Incorporation of the Pledgor or any
material agreement or other material instrument binding upon the Pledgor or
any of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Pledgor or
any of its subsidiaries or result in the creation or imposition of any Lien
on any assets of the Pledgor, except for the security interest granted
under the Pledge and Security Agreement.
<PAGE>
9
(c) If the Trustee receives, prior to 9:00 A.M. New York City time on
the Termination Date, the Officer's Certificate and the Opinion of Counsel,
the Trustee shall (x) purchase U.S. Government Obligations in amounts and
maturities sufficient upon the receipt of scheduled interest and principal
payments on such securities, in the opinion of a nationally recognized firm
of independent public accountants selected by the Pledgor, to provide for
payment in full of the first six scheduled interest payments due on all
Notes then outstanding (including any interest that may be due in the
event the Exchange Offer is not consummated or the Shelf Registration
Statement is not declared effective as required by the Registration Rights
Agreement) and (y) disburse from the Cash Collateral Account and/or the
Collateral Investments Account to, or at the written direction of, the
Pledgor by the close of business on the date such U.S. Government
Obligations are purchased funds and/or Cash Equivalents, to the extent the
proceeds from the sale of the Cash Equivalents held in the Collateral
Investments Account would exceed the amount sufficient to purchase the U.S.
Government Obligations referred to in clause (x) above; provided, however,
-------- -------
that if the Officer's Certificate and the Opinion of Counsel are received
by the Trustee (i) on a day other than a Business Day or (ii) after 9:00
A.M. New York City time on such date, then, in either instance, the Trustee
may disburse the proceeds by the close of business on the next Business
Day.
(d) (i) On the Termination Date (or, in the event the Trustee
receives a certificate signed by the President or any Vice President of the
Pledgor stating that an Officer's Certificate will not be delivered to the
Trustee by the Termination Date, on the date the Trustee receives such
certificate), if the conditions required for release of funds and/or Cash
Equivalents as provided in clause (c) above have not been satisfied, the
Trustee shall mail a notice by first class mail to each Holder's last
address as it appears on the Security Register (as determined in the
Indenture) stating that all of the outstanding Notes shall be redeemed
within 60 days after the date of such notice (the "Redemption Date"), on
---------------
not less than 30 nor more than 60 days' prior notice, at 101% of the
principal amount thereof plus accrued interest thereon from the Closing
Date to the Redemption Date (the "Special Redemption Price"), and shall
------------------------
state that the Notes must be surrendered to the Trustee in order to collect
the Special Redemption Price.
(ii) On the Business Day prior to the Redemption Date, the Trustee
shall release all Collateral to the Paying Agent. The Notes shall be
redeemed as specified in the Indenture.
(e) If the Pledgor is required to effect the redemption contemplated
by clause (d) above and for any reason the amount of Collateral to be
released is insufficient to pay the aggregate Special Redemption Price to
redeem all of the outstanding Notes as provided in the Indenture, the
Pledgor, each Reorganization
<PAGE>
10
Subsidiary and ITC Holding Company, Inc. jointly and severally agree to pay
to the Paying Agent, on or prior to the Redemption Date, the amount of
funds necessary to permit all outstanding Notes to be redeemed in
accordance with the provisions of the Indenture.
(f) If at any time following disbursement by the Trustee in accordance
with clause (c) above, the principal of and earnings on the Collateral
exceed 100% of the amount sufficient, in the written opinion of a
nationally recognized firm of independent accountants selected by the
Pledgor and delivered to the Trustee, to provide for payment in full of the
first six scheduled interest payments due on the Notes, the Pledgor may
direct the Trustee to release any such overfunded amount to the Pledgor or
to such other party as the Pledgor may direct. Upon receipt of an Issuer
Order, the Trustee shall pay over to the Pledgor or the Pledgor's
Designee, as the case may be, any such overfunded amount.
(g) Upon payment in full of the first six scheduled interest payments
on the Notes in a timely manner, the security interest in the Collateral
evidenced by this Pledge and Security Agreement will automatically
terminate and be of no further force and effect and the Collateral shall
promptly be paid over and transferred to the Pledgor. Furthermore, upon the
release of any Collateral from the Cash Collateral Account and/or the
Collateral Investments Account in accordance with the terms of this Pledge
and Security Agreement, whether upon release of Collateral to Holders as
payment of interest or otherwise, the security interest evidenced by this
Pledge and Security Agreement in such released Collateral will
automatically terminate and be of no further force and effect.
(h) At least three Business Days prior to the due date of any of the
first six scheduled interest payments on the Notes, the Pledgor covenants
to give the Trustee (by Issuer Order) notice as to whether payment of
interest will be made pursuant to Section 7(a) or 7(b) and as to the
respective amounts of interest that will be paid pursuant to Section 7(a)
or 7(b). If no such notice is given, the Trustee will act pursuant to
Section 7(a) as if it had received an Issuer Order pursuant thereto for the
payment in full of the interest then due.
(i) The Trustee shall not be required to liquidate any Collateral
Investment in order to make any scheduled payment of interest or any
release hereunder unless instructed to do so by Issuer Order or pursuant to
Section 14 hereof.
(j) Nothing contained in Section 1, Section 5, Section 6, this Section
7 or any other provision of this Pledge and Security Agreement shall (i)
afford the Pledgor any right to issue entitlement orders with respect to
any security entitlement to any of
<PAGE>
11
the Collateral Investments or any securities account in which any such
security entitlement may be carried, or otherwise afford the Pledgor
control of any such security entitlement or (ii) otherwise give rise to any
rights of the Pledgor with respect to any of the Collateral Investments,
any security entitlement thereto or any securities account in which any
such security entitlement may be carried, other than the Pledgor's
beneficial interest under this Pledge and Security Agreement in collateral
pledged to and subject to the exclusive dominion and control (consistent
with this Pledge and Security Agreement) of the Trustee in its capacity as
such (and not as a securities intermediary). The Pledgor acknowledges,
confirms and agrees that the Trustee holds a security entitlement to the
Collateral Investments solely as trustee for the Holders of the Notes and
not as a securities intermediary or financial intermediary.
SECTION 8. Representations and Warranties. The Pledgor hereby
------------------------------
represents and warrants that:
(a) The execution and delivery by the Pledgor of, and the performance
by the Pledgor of its obligations under, this Pledge and Security Agreement
will not contravene any provision of applicable law or the Certificate of
Incorporation of the Pledgor or any material agreement or other material
instrument binding upon the Pledgor or any of its subsidiaries or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its subsidiaries, or result in the
creation or imposition of any Lien on any assets of the Pledgor, except for
the security interests granted under this Pledge and Security Agreement; no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required (i) for the performance by the
Pledgor of its obligations under this Pledge and Security Agreement, (ii)
for the pledge by the Pledgor of the Collateral pursuant to this Pledge and
Security Agreement or (iii) except for any such consents, approvals,
authorizations or orders required to be obtained by the Trustee (or the
Holders) for reasons other than the consummation of this transaction, for
the exercise by the Trustee of the rights provided for in this Pledge and
Security Agreement or the remedies in respect of the Collateral pursuant to
this Pledge and Security Agreement.
(b) The Pledgor is the beneficial owner of the Collateral, free and
clear of any Lien or claims of any person or entity (except for the
security interests granted under this Pledge and Security Agreement). No
financing statement covering the Pledgor's interest in the Collateral is on
file in any public office other than the financing statements, if any,
filed pursuant to this Pledge and Security Agreement.
(c) This Pledge and Security Agreement has been duly authorized,
validly executed and delivered by the Pledgor and (assuming the due
authorization and valid
<PAGE>
12
execution and delivery of this Pledge and Security Agreement by the Trustee
and the Placement Agents and enforceability of this Pledge and Security
Agreement against the Trustee and the Placement Agents in accordance with
its terms) constitutes a valid and binding agreement of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as (i)
the enforceability hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, preference, reorganization, moratorium or similar
laws now or hereafter in effect relating to or affecting creditors' rights
or remedies generally, (ii) the availability of equitable remedies may be
limited by equitable principles of general applicability and the discretion
of the court before which any proceeding therefor may be brought, (iii) the
exculpation provisions and rights to indemnification hereunder may be
limited by U.S. federal and state securities laws and public policy
considerations and (iv) the waivers of rights and defenses contained in
Section 14(b), Section 17.11 and Section 17.16 hereof may be limited by
applicable law.
(d) Upon the filing of financing statements, if any, required by the
U.C.C. in the appropriate offices in the State of New York and the State of
Georgia, and the delivery to the Trustee of the Collateral, in accordance
with this Pledge and Security Agreement, the pledge of and grant of a
security interest in the Collateral securing the payment of the Obligations
for the benefit of the Trustee and the Holders of the Notes will constitute
a first priority perfected security interest in such Collateral,
enforceable as such against all creditors of the Pledgor (and any persons
purporting to purchase any of the Collateral from the Pledgor), other than
as permitted by the Indenture.
(e) There are no legal or governmental proceedings pending or, to the
best of the Pledgor's knowledge, threatened to which the Pledgor or any of
the Reorganization Subsidiaries is a party or to which any of the
properties of the Pledgor or any Reorganization Subsidiary is subject that
would materially adversely affect the power or ability of the Pledgor to
perform its obligations under this Pledge and Security Agreement or to
consummate the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge and Security
Agreement is not prohibited by law or governmental regulation (including,
without limitation, Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default exists.
SECTION 9. Further Assurances. The Pledgor will, promptly upon
------------------
request by the Trustee (which request the Trustee may submit at the direction of
the Holders of a majority in principal amount of the Notes then outstanding),
execute and deliver or cause to be executed
<PAGE>
13
and delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, deliver any instruments to the Trustee and take
any other actions that are necessary or desirable to perfect, continue the
perfection of, or protect the first priority of the Trustee's security interest
in and to the Collateral, to protect the Collateral against the rights, claims
or interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee) or to effect the purposes of this
Pledge and Security Agreement. The Pledgor also hereby authorizes the Trustee to
file any financing or continuation statements in the United States with respect
to the Collateral without the signature of the Pledgor (to the extent permitted
by applicable law). The Pledgor will promptly pay all reasonable costs incurred
in connection with any of the foregoing within 45 days of receipt of an invoice
therefor. The Pledgor also agrees, whether or not requested by the Trustee, to
take all actions that are necessary to perfect or continue the perfection of, or
to protect the first priority of, the Trustee's security interest in and to the
Collateral, including the filing of all necessary financing and continuation
statements, and to protect the Collateral against the rights, claims or
interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee).
SECTION 10. Covenants. The Pledgor covenants and agrees with the
---------
Trustee and the Holders of the Notes that from and after the date of this Pledge
and Security Agreement until the earlier of payment in full in cash of (x) each
of the first six scheduled interest payments due on the Notes under the terms of
the Indenture or (y) all obligations due and owing under the Indenture and the
Notes in the event such obligations become due and payable prior to the payment
of the first six scheduled interest payments on the Notes:
(a) that (i) it will not (and will not purport to) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the
Collateral or its beneficial interest therein, and (ii) it will not create
or permit to exist any Lien upon or other adverse interest in or with
respect to its beneficial interest in any of the Collateral (except for the
security interests granted under this Pledge and Security Agreement);
provided, however, that the Pledgor may transfer and assign its beneficial
-------- -------
interest in the Collateral, subject in all respects to the rights and
interests of the Trustee and the Holders of the Notes hereunder, to a
wholly owned subsidiary of the Pledgor (the "Assignee") if (w) the Assignee
agrees in writing that the first six scheduled interest payments due on the
Notes shall be paid from the Collateral and assumes the Pledgor's
obligations under this Pledge and Security Agreement (but not the Pledgor's
recourse obligations under the Notes), (x) the assignment of the beneficial
interest in the Collateral and such agreement by the Assignee and the
payment of the interest payments from the Collateral would not violate any
agreement or instrument to which the Pledgor or the Assignee is a party,
(y) the Assignee agrees, in writing, with the Trustee (for itself and the
Holders of the Notes) that (I) it will not enter into any agreement that
would interfere with or prohibit payment of the first six scheduled
<PAGE>
14
interest payments due on the Notes from the Collateral, (II) it will not
(and will not purport to) sell or otherwise dispose of, or grant any option
or warrant with respect to, any of the Collateral or its beneficial
interest therein and (III) it will not create or permit to exist any Lien
upon or other adverse interest in or with respect to its beneficial
interest in any of the Collateral (except for the security interests
granted under this Pledge and Security Agreement); and
(b) that it will not (i) enter into any agreement or understanding
that restricts or inhibits or purports to restrict or inhibit the Trustee's
rights or remedies hereunder, including, without limitation, the Trustee's
right to sell or otherwise dispose of the Collateral or (ii) fail to pay or
discharge any tax, assessment or levy of any nature with respect to its
beneficial interest in the Collateral not later than five days prior to the
date of any proposed sale under any judgment, writ or warrant of attachment
with respect to such beneficial interest.
SECTION 11. Power of Attorney. In addition to all of the powers
-----------------
granted to the Trustee pursuant to the Indenture, the Pledgor hereby appoints
and constitutes the Trustee as the Pledgor's attorney-in-fact (with full power
of substitution) to exercise to the fullest extent permitted by law all of the
following powers upon and at any time after the occurrence and during the
continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Trustee in its sole reasonable discretion, and such
payments made by the Trustee to become part of the Obligations of the Pledgor to
the Trustee, due and payable immediately upon demand. The Trustee's authority
under this Section 11 shall include, without limitation, the authority to
endorse and negotiate any checks or other instruments representing proceeds of
Collateral, execute and give receipt for any certificate of ownership or any
document constituting Collateral, transfer title to any item of Collateral, sign
the Pledgor's name on all financing statements (to the extent permitted by
applicable law) or any other documents deemed necessary or appropriate by the
Trustee to preserve, protect or perfect the security interest in the Collateral
and to file the same, prepare, file and sign the Pledgor's name on any notice of
Lien, and to take any other actions arising from or incident to the powers
granted to the Trustee in this Pledge and Security Agreement. This power of
attorney is coupled with an interest and is irrevocable by the Pledgor.
SECTION 12. No Assumption of Duties; Reasonable Care. The rights and
----------------------------------------
powers granted to the Trustee hereunder are being granted in order to establish,
preserve and protect the security interest of the Trustee and the Holders of the
Notes in and to the Collateral granted hereby and shall not be interpreted to
and shall not impose any duties on the Trustee in connection therewith other
than those expressly provided herein or imposed under applicable
<PAGE>
15
law. Except as provided by applicable law or by the Indenture, the Trustee shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Trustee accords similar property held by
the Trustee for its own account, it being understood that the Trustee in its
capacity as such shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities or other
matters relative to any Collateral, whether or not the Trustee has or is deemed
to have knowledge of such matters, (b) taking any necessary steps to preserve
rights against any parties with respect to any Collateral or (c) investing or
reinvesting any of the Collateral.
SECTION 13. Indemnity. The Pledgor shall indemnify, hold harmless
---------
and defend the Trustee and its directors, officers, agents and employees, from
and against any and all claims, actions, obligations, liabilities and expenses,
including reasonable defense costs, reasonable investigative fees and costs, and
reasonable legal fees and damages arising from the Trustee's performance as
Trustee under this Pledge and Security Agreement, except to the extent that such
claim, action, obligation, liability or expense is directly attributable to the
bad faith, gross negligence or wilful misconduct of such indemnified person.
<PAGE>
16
SECTION 14. Remedies upon Event of Default. If any Event of Default
------------------------------
under the Indenture or default hereunder (any such Event of Default or default
being referred to in this Pledge and Security Agreement as an "Event of
--------
Default") shall have occurred and be continuing:
- -------
(a) The Trustee and the Holders of the Notes shall have, in addition
to all other rights given by law or by this Pledge and Security Agreement
or the Indenture, all of the rights and remedies with respect to the
Collateral of a secured party under the U.C.C. in effect in the State of
New York at that time. In addition, with respect to any Collateral that
shall then be in or shall thereafter come into the possession or custody of
the Trustee, the Trustee may and, at the direction of the Holders of a
majority in principal amount of the Notes then outstanding, shall, sell or
cause the same to be sold at any broker's board or at public or private
sale, in one or more sales or lots, at such price or prices as the Trustee
may deem best, for cash or on credit or for future delivery, without
assumption of any credit risk. The purchaser of any or all Collateral so
sold shall thereafter hold the same absolutely, free from any claim,
encumbrance or right of any kind whatsoever created by or through the
Pledgor. Unless any of the Collateral threatens, in the reasonable
judgment of the Trustee, to decline speedily in value or is or becomes of a
type sold on a recognized market, the Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof, or of
the time after which any private sale or other intended disposition is to
be made. Any sale of the Collateral conducted in conformity with
reasonable commercial practices of banks, insurance companies, commercial
finance companies, or other financial institutions disposing of property
similar to the Collateral shall be deemed to be commercially reasonable.
Any requirements of reasonable notice shall be met if such notice is mailed
to the Pledgor as provided in Section 17.1 hereof at least ten (10) days
before the time of the sale or disposition. The Trustee or any Holder of
Notes may, in its own name or in the name of a designee or nominee, buy any
of the Collateral at any public sale and, if permitted by applicable law,
at any private sale. All expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of the Collateral.
(b) The Pledgor further agrees to use its reasonable best efforts to
do or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Collateral pursuant to this
Section 14 valid and binding and in compliance with any and all other
applicable requirements of law. The Pledgor further agrees that a breach
of any of the covenants contained in this Section 14 will cause irreparable
injury to the Trustee and the Holders of the Notes, that the Trustee and
the Holders of the Notes have no adequate remedy at law in respect of such
breach and, as
<PAGE>
17
a consequence, that each and every covenant contained in this Section 14
shall be specifically enforceable against the Pledgor, and the Pledgor
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no Event
of Default has occurred.
SECTION 15. Expenses. The Pledgor will upon demand pay to the
--------
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
and Security Agreement, (b) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (c) the
exercise or enforcement of any of the rights of the Trustee and the Holders of
the Notes hereunder or (d) the failure by the Pledgor to perform or observe any
of the provisions hereof.
SECTION 16. Security Interest Absolute. All rights of the Trustee
--------------------------
and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens on
any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other circumstance
which might otherwise constitute a defense available to, or a discharge of,
the Pledgor in respect of the Obligations or of this Pledge and Security
Agreement.
SECTION 17. Miscellaneous Provisions.
------------------------
17.1. Notices. Any notice or communication shall be sufficiently
-------
given if in writing and delivered in person or mailed by first class mail,
commercial courier service or telecopier communication, addressed as follows:
if to the Pledgor:
-----------------
ITC/\DeltaCom, Inc.
<PAGE>
18
206 West Ninth Street
West Point, Georgia 31833
Attention: Mr. Douglas Shumate
if to the Trustee:
-----------------
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Mr. Louis Young
17.2. No Adverse Interpretation of Other Agreements. This Pledge and
---------------------------------------------
Security Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement (other than the Indenture) may be used to interpret this Pledge
and Security Agreement.
17.3. Severability. The provisions of this Pledge and Security
------------
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or provision
of this Pledge and Security Agreement in any jurisdiction.
17.4. Headings. The headings in this Pledge and Security Agreement
--------
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
17.5. Counterpart Originals. This Pledge and Security Agreement may
---------------------
be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same agreement.
17.6. Benefits of Pledge and Security Agreement. Nothing in this
-----------------------------------------
Pledge and Security Agreement, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder, and the Holders of
the Notes, any benefit or any legal or equitable right, remedy or claim under
this Pledge and Security Agreement.
17.7. Amendments, Waivers and Consents. Any amendment or waiver of
--------------------------------
any provision of this Pledge and Security Agreement and any consent to any
departure by the Pledgor from any provision of this Pledge and Security
Agreement shall be effective only if made or duly given in compliance with all
of the terms and provisions of the Indenture, and neither the Trustee nor any
Holder of Notes shall be deemed, by any act, delay, indulgence,
<PAGE>
19
omission or otherwise, to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. Consistent with the foregoing, this Pledge and
Security Agreement may be amended, its provisions may be waived and departures
from its provisions may be consented to by action of the Pledgor and the Trustee
and (if applicable) the Holders of the Notes, all as provided in the Indenture,
and no such amendment, waiver or consent shall require any action or approval of
the Placement Agents. Failure of the Trustee or any Holder of Notes to exercise,
or delay in exercising, any right, power or privilege hereunder shall not
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Trustee or any Holder of Notes of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy that the Trustee or such Holder of Notes would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
17.8. Interpretation of Agreement. To the extent a term or provision
---------------------------
of this Pledge and Security Agreement conflicts with the Indenture, the
Indenture shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Pledge and Security Agreement shall not be relevant to determine the
meaning of this Pledge and Security Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.
17.9. Continuing Security Interest; Termination. (a) This Pledge
-----------------------------------------
and Security Agreement shall create a continuing security interest in and to the
Collateral and shall, except as otherwise provided in the Indenture or in this
Pledge and Security Agreement, remain in full force and effect until the payment
in full in cash of the Obligations. This Pledge and Security Agreement shall be
binding upon the Pledgor, its transferees, successors and assigns, and shall
inure, together with the rights and remedies of the Trustee hereunder, to the
benefit of the Trustee, the Holders of the Notes and their respective
successors, transferees and assigns.
(b) This Pledge and Security Agreement shall terminate upon the
payment in full in cash of the Obligations. At such time, the Trustee shall,
pursuant to an Issuer Order, reassign and redeliver to the Pledgor all of the
Collateral hereunder that has not been sold, disposed of, retained or applied by
the Trustee in accordance with the terms of this Pledge and Security Agreement
and the Indenture. Such reassignment and redelivery shall be without warranty
by or recourse to the Trustee in its capacity as such, except as to the absence
of any Liens on the Collateral created by or arising through the Trustee, and
shall be at the reasonable expense of the Pledgor.
<PAGE>
20
17.10. Survival Provisions. All representations, warranties and
-------------------
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Pledge and Security Agreement, and shall terminate only upon
the termination of this Pledge and Security Agreement. The obligations of the
Pledgor under Sections 13 and 15 hereof shall survive the termination of this
Agreement.
17.11. Waivers. The Pledgor waives presentment and demand for
-------
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
17.12. Authority of the Trustee. (a) The Trustee shall have and be
------------------------
entitled to exercise all powers hereunder that are specifically granted to the
Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Pledge and Security Agreement or the Indenture, neither the Trustee nor any
director, officer, employee, attorney or agent of the Trustee shall be liable to
the Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee, hereunder, except for its own bad faith, gross negligence
or willful misconduct, and the Trustee shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons. The Trustee shall
have no duty to cause any financing statement or continuation statement to be
filed in respect of the Collateral.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Pledge and Security Agreement with respect to any action
taken by the Trustee or the exercise or non-exercise by the Trustee of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge and Security Agreement shall, as between
the Trustee and the Holders of the Notes, be governed by the Indenture and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Trustee and the Pledgor, the Trustee shall be
conclusively presumed to be acting as agent for the Holders of the Notes with
full and valid authority so to act or refrain from acting, and the Pledgor shall
not be obligated or entitled to make any inquiry respecting such authority.
17.13. Intentionally Omitted.
<PAGE>
21
17.14. Final Expression. This Pledge and Security Agreement,
----------------
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Pledge and
Security Agreement and is intended as a complete and exclusive statement of the
terms and conditions thereof.
17.15. Rights of Holders of the Notes. No Holder of Notes shall have
------------------------------
any independent rights hereunder other than those rights granted to individual
Holders of the Notes pursuant to Section 6.07 of the Indenture; provided that
--------
nothing in this subsection shall limit any rights granted to the Trustee under
the Notes or the Indenture.
17.16. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
---------------------------------------------------------
TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AND SECURITY AGREEMENT SHALL BE
- ------------------------
GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE
NOTES IN CONNECTION WITH THIS PLEDGE AND SECURITY AGREEMENT, AND WHETHER ARISING
IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING: THE MATTERS
IDENTIFIED IN 31 C.F.R. (S)(S) 357.10 AND 357.11 (AS IN EFFECT ON THE DATE OF
THIS AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN.
(b) THE PLEDGOR HAS APPOINTED CORPORATION SERVICE COMPANY, 80 STATE
STREET, 6TH FLOOR, ALBANY, NY 12207 AS ITS AGENT FOR SERVICE OF PROCESS IN ANY
SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AND SECURITY AGREEMENT
AND FOR ACTIONS BROUGHT UNDER U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN
ANY FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK AND AGREES TO SUBMIT
TO THE JURISDICTION OF ANY SUCH COURT.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE
COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND
HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE COLLATERAL, AS
THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH COLLATERAL, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE
PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
IN ANY
<PAGE>
22
PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH
PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF NEW YORK
ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR (EXCEPT AS
OTHERWISE PROVIDED IN THIS PLEDGE AND SECURITY AGREEMENT OR THE INDENTURE) THE
TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE AND
SECURITY AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A
COURT THAT IS BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY
BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH,
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN
CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER PERTAINING TO THIS PLEDGE AND SECURITY AGREEMENT OR ANY
RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF
NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR
PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AND SECURITY AGREEMENT OR ANY
RELATED AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR ON THE ONE HAND AND THE
TRUSTEE AND/OR THE HOLDERS OF THE NOTES ON THE OTHER HAND.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
23
IN WITNESS WHEREOF, the Pledgor, ITC Holding Company, Inc., each of the
Reorganization Subsidiaries, the Placement Agents and the Trustee have each
caused this Pledge and Security Agreement to be duly executed and delivered as
of the date first above written.
ITC/\DeltaCom, Inc.
By /s/ Andrew Walker
-------------------
Name: Andrew Walker
Title: Chief Executive Officer
ITC Holding Company, Inc.
By /s/ Campbell B. Lanier, III
--------------------------------
Name: Campbell B. Lanier, III
Title: Chairman
DeltaCom, Inc.
By /s/ Andrew Walker
-------------------
Name: Andrew Walker
Title: Chief Executive Officer
Eastern Telecom, Inc.
By /s/ Andrew Walker
-------------------
Name: Andrew Walker
Title: Chief Executive Officer
Interstate FiberNet
By ITC Transmission Systems, Inc.,
its general partner
By /s/ Andrew Walker
-----------------------
Name: Andrew Walker
Title: Chief Executive Officer
<PAGE>
24
Gulf States Transmission Systems, Inc.
By /s/ Andrew Walker
-------------------
Name: Andrew Walker
Title: Chief Executive Officer
ITC Transmission Systems, Inc.
By /s/ Andrew Walker
-------------------
Name: Andrew Walker
Title: Chief Executive Officer
ITC Transmission Systems II, Inc.
By /s/ Andrew Walker
-------------------
Name: Andrew Walker
Title: Chief Executive Officer
Placement Agents:
----------------
Morgan Stanley & Co. Incorporated
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
First Union Capital Markets Corp.
NationsBanc Capital Markets, Inc.
By: Morgan Stanley & Co. Incorporated
By: /s/ Robert Shepardson
---------------------------------------
Name: Robert Shepardson
Title: Principal
<PAGE>
25
Trustee:
-------
United States Trust Company of New York, as Trustee
By: /s/ Gerard F. Ganey
-------------------------
Name: Gerard F. Ganey
Title: Sr. VP
<PAGE>
Exhibit 10.1
CAPACITY AGREEMENT
By and Between:
Interstate FiberNet
And
Entergy Technology Company
Dated as of February 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 DEFINITIONS....................................................... 4
1.1 Available Capacity.................................................... 4
1.2 Delinquent Amounts.................................................... 5
1.3 Gross Revenue......................................................... 5
1.4 House Account......................................................... 5
1.5 Total Revenue Commitment.............................................. 6
1.6 Sales Target.......................................................... 6
1.7 Special Seller Facilities............................................. 6
ARTICLE 2 CAPACITY.......................................................... 6
2.1 Capacity.............................................................. 6
ARTICLE 3 PAYMENT........................................................... 7
3.1 Rates and Charges..................................................... 7
3.2 Taxes................................................................. 7
3.3 Billing............................................................... 8
3.4 Late Payments......................................................... 8
ARTICLE 4 ALLOWANCE FOR INTERRUPTION........................................ 8
ARTICLE 5 RIGHTS AND RESPONSIBILITIES OF IFN................................ 9
5.1 Use of Capacity and Special Seller Facilities......................... 9
5.2 Damages by IFN........................................................ 9
5.3 Interference.......................................................... 10
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6 TERM............................................................. 10
6.1 Effective Date...................................................... 10
6.2 Termination of Agreement............................................ 10
6.3 Service Termination Rights.......................................... 12
6.4 Termination of Exclusivity.......................................... 13
ARTICLE 7 ADDITIONAL COVENANTS............................................. 13
7.1 Covenants of ETC.................................................... 13
7.2 Covenants of ETC and IFN............................................ 14
ARTICLE 8 REPRESENTATIONS AND WARRANTIES................................... 14
8.1 Authorization....................................................... 14
8.2 Binding Obligation.................................................. 15
8.3 Proceedings......................................................... 15
ARTICLE 9 WARRANTY; LIMITATION OF LIABILITY................................ 15
ARTICLE 10 CUMULATIVE REMEDIES............................................. 17
ARTICLE 11 OTHER VENTURES.................................................. 17
ARTICLE 12 MISCELLANEOUS................................................... 18
12.1 Relationship of the Parties......................................... 18
12.2 Partial Exercise of Rights.......................................... 19
12.3 Force Majeure....................................................... 19
12.4 Compliance with Applicable Law and Regulation....................... 20
12.5 Notices............................................................. 20
12.6 Entire Agreement; Amendment......................................... 21
12.7 Limitation on Benefits of this Agreement............................ 21
12.8 Binding Effect...................................................... 22
12.9 Governing Law....................................................... 22
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
12.10 Survival of Terms.................................................... 22
12.11 Headings............................................................. 22
12.12 Pronouns............................................................. 23
12.13 Severability......................................................... 23
12.14 Assignment........................................................... 23
12.15 Counterparts......................................................... 24
12.16 Audit................................................................ 24
</TABLE>
3
<PAGE>
ETC DRAFT: 1/8/97
CAPACITY AGREEMENT
------------------
This Capacity Agreement (the "Agreement") is entered into as of February 1,
1997 by and between Interstate FiberNet, a Georgia general partnership ("IFN"),
and Entergy Technology Company, a Delaware Corporation ("ETC").
WHEREAS, ETC desires to market, and IFN desires to act as exclusive agent
to market, all of ETC's Available Capacity of the type specified in Exhibit A
---------
hereto;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1 DEFINITIONS
As used herein, the following terms shall have the following meanings
unless the context otherwise requires:
1.1 Available Capacity
"Available Capacity" means the amount of bandwidth in increments of
--------------------
equivalent DS-3 channels designated as available to ETC, for inter-city,
point-to-point communications, by the Entergy operating companies (Entergy
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy
Mississippi, Inc. and Entergy New Orleans, Inc.) and/or their affiliate service
company (Entergy
4
<PAGE>
Services, Inc.), (together the Entergy Operating Companies, and their service
company, shall be referred to as "Entergy"), and made available to IFN as
detailed in Exhibit E. The parties agree that IFN's right to use that available
capacity may not adversely affect the amount of capacity reserved or used by
Entergy and may not subject Entergy to regulation by state or local governments
or agencies thereof as a telecommunications utility or common carrier. The
parties understand that the telecommunications facilities or capacity made
available to ETC by Entergy for other purposes or facilities or capacity which
is constructed and/or operated by ETC for other purposes does not constitute
"Available Capacity."
1.2 Delinquent Amounts
"Delinquent Amounts" means any amounts billed by IFN to customers for the
--------------------
use of capacity and services on the ETC system, which amounts have not been paid
to IFN for at least 180 days after the Customer Due Date (normally 30 days after
the Invoice Date).
1.3 Gross Revenue
"Gross Revenue" means the gross revenue generated during any calendar month
---------------
by from sales of circuits, utilizing the Available Capacity on the ETC system,
by IFN to its customers, whether or not IFN has actually received such revenue
from such customers, excluding applicable taxes.
1.4 House Account
"House Account" means an account developed principally because of ETC's
---------------
relationship with a customer based on the customer's needs within or outside the
Entergy System geographical service region. Notwithstanding the above, Entergy
5
<PAGE>
Corporation and any of its subsidiaries and affiliates shall always be
considered a House Account within the context of this agreement.
1.5 Total Revenue Commitment
"Total Revenue Commitment" means the sum total of all revenue, as defined
--------------------------
by total billings (excluding applicable taxes) by IFN to its customers,
attributable to capacity sold on the ETC system.
1.6 Sales Target
"Sales Target" means the revenue projections mutually agreed to by IFN and
--------------
ETC, and accepted as a basis to determine ETC's right to alter the exclusivity
of this agreement.
1.7 Special Seller Facilities
"Special Seller Facilities" means electronic and optronic equipment, and
---------------------------
all other articles of property that may be necessary to create a network of
fiber optic transmission capacity throughout the IFN and ETC systems, and to
effectively utilize the capacities described in Exhibit A.
----------
ARTICLE 2 CAPACITY
2.1 Capacity
Subject to the terms and conditions contained herein, and to the
extent and as specified in the Statement of Capacity and Special Seller
Facilities attached as Exhibit A hereto, ETC agrees to make available and IFN
---------
agrees to bring to
6
<PAGE>
market and provide administrative, billing, provisioning, and
network management services for, all of ETC's Available Capacity. ETC agrees to
provide, at its own expense, certain special facilities and/or equipment
required by IFN in order to make ready and market the Available Capacity
pursuant hereto (the "Special Seller Facilities"). IFN and ETC agree to share
the expense equally for Special Seller Facilities installed on, or adjacent to,
ETC facilities that enhance the reliability and/or market potential of both the
ETC network, and the IFN network apart from ETC.
ARTICLE 3 PAYMENT
3.1 Rates and Charges
In consideration of the provision of the Capacity and Special Seller
Facilities described herein by ETC, IFN shall pay ETC the rates and charges set
forth in Exhibit B and Exhibit C hereto. The terms of payment of such rates and
--------- ---------
charges shall be as set forth in this Article 3 and in Exhibit B.
--------- ---------
3.2 Taxes
IFN shall pay any applicable federal, state or local use, excise or
sales taxes in connection with the Capacity and/or Special Seller Facilities
furnished to IFN pursuant hereto. Furthermore, IFN and ETC shall cooperate in
taking all reasonable actions necessary to minimize, or to qualify for
exemptions from, any such taxes, duties or liabilities, including the furnishing
of certifications that purchases by IFN are for purposes of resale.
7
<PAGE>
3.3 Billing
IFN shall bill its customers on a monthly basis in accordance with
Exhibit D hereto (or on such other basis as may be specified in Exhibit D).
- --------- ---------
3.4 Late Payments
If any payment due hereunder is not received by ETC within 30 days
after the Due Date for such payment, the balance due and unpaid shall be subject
to a late payment on such delinquent amounts at the rate of 1.5% per month or
the maximum lawful rate allowed under applicable law, whichever is lower.
ARTICLE 4 ALLOWANCE FOR INTERRUPTION
In the case of any Interruption (as defined in Exhibit A hereto) in
---------
the Capacity provided under this Agreement, allowance for the period of
Interruption with respect to each Route (as defined in Exhibit A hereto)
---------
affected by such Interruption, if not due to the fault or negligence of IFN,
shall be as follows:
(a) If the customer's contract contains an Interruption Credit
detailed in Exhibit F, Customer shall be credited for an Interruption at the
rate as provided in the affected Customer's contracts. If the customer's
contract does not detail a specific Interruption Credit, category A shall apply.
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 F, 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
8
<PAGE>
been payable to the to Interstate FiberNet as Gross Revenue with respect to such
interrupted Capacity.
(b) When Capacity provided by ETC includes more than one
communications circuit, the Interruption allowance shall apply only to the
circuit(s) interrupted.
(c) An Interruption allowance shall not be applicable for any period
during which IFN fails to afford access to any facilities for the purpose of
investigating and clearing troubles.
ARTICLE 5 RIGHTS AND RESPONSIBILITIES OF IFN
5.1 Use of Capacity and Special Seller Facilities
Capacity and Special Seller Facilities provided by ETC under this
Agreement may be used by IFN, among other things, in furnishing services offered
to its customers and for operational and administrative purposes directly
related to the provision of IFN's authorized services. The Capacity and Special
Seller Facilities provided under this Agreement shall not be used by IFN for any
unlawful purpose.
5.2 Damages by IFN
IFN shall reimburse ETC for damages to facilities of ETC used in
providing Capacity under this Agreement or to Special Seller Facilities that is
caused by the negligence of IFN or resulting from improper use of such Capacity
or Special Seller Facilities by IFN.
9
<PAGE>
5.3 Interference
Special Seller Facilities and facilities used by ETC in providing
Capacity hereunder may be connected with facilities of IFN and terminal
equipment or communications systems provided by IFN or its customers. Unless
otherwise agreed by ETC, all facilities provided by IFN or its customers shall
be subject to the technical interface specifications set forth in the documents
specified in Exhibit A hereto. IFN shall use reasonable efforts to assure that
---------
the characteristics and methods of operation of any circuits, apparatuses,
facilities, or equipment provided by IFN, which are used in association with
facilities used by ETC in providing Capacity or with Special Seller Facilities,
shall comply with any requirements with respect thereto set forth in the
documents specified in Exhibit A hereto.
---------
ARTICLE 6 TERM
6.1 Effective Date
The term of this Agreement shall commence on the date first written
above (the "Effective Date") and, unless earlier terminated in accordance with
Section 6.2 or Section 12.3 hereof, shall continue until 12:01 A.M. on the fifth
- ----------- ------------
anniversary of the Effective Date. This Agreement may be extended for successive
renewal terms of 2 years each (a "Renewal Term") upon the mutual written
agreement of the parties hereto.
6.2 Termination of Agreement
6.2.1 This Agreement may be terminated by either party, with
cause, at any time, upon 90 days' prior written notice to the other party. Such
10
<PAGE>
notice shall set forth a description of the cause for termination and provide
the non-terminating party an opportunity to cure such cause within 60 days after
the date of delivery of such notice. If such cure occurs within such 60-day
period, this Agreement shall remain in full force and effect as if such written
notice of termination had not been given. If such cure does not occur within
such 60-day period, then the termination shall be effective at 11:59 P.M. E.S.T.
on the 90th day after the date of delivery of such notice to the nonterminating
party. For purposes of this Section, "with cause" shall be deemed to mean: (i) a
material breach of this Agreement by the non-terminating party; (ii) the failure
of the non-terminating party generally to pay its debts as such debts become
due, the admission by such party in writing of its inability to pay its debts as
such debts become due, or the making by such party of any general assignment for
the benefit of creditors; (iii) the commencement by the non-terminating party of
any case, proceeding, or other action seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts under any
law relating to bankruptcy, insolvency, or reorganization, or relief of debtors,
or seeking appointment of a receiver, trustee, custodian, or other similar
official for it or for all or any substantial part of its property; or (iv) the
commencement of any case, proceeding or other action against the non-terminating
party seeking to have any order for relief entered against such party as debtor,
or seeking reorganization, arrangement, adjustment, liquidation, dissolution or
composition of such party or its debts under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors, or seeking appointment of a
receiver, trustee, custodian, or other similar official for such party or for
all or any substantial part of the property of such party, and (I) such party
shall, by any act or omission, indicate its consent to, approval of, or
acquiescence in such case, proceeding or action, or (II) such case, proceeding
or action results in the entry of an order for relief which is not fully stayed
within seven business days after the entry
11
<PAGE>
thereof, or (III) such case, proceeding, or action remains undismissed for a
period of thirty (30) days or more or is dismissed or suspended only pursuant to
Section 305 of the United States Bankruptcy Code or any corresponding provision
of any future United States Bankruptcy law.
6.2.2 Upon thirty (30) days prior notice, either party shall
have the right, without liability to the other, to terminate this Agreement if
any material rate or term contained herein and relevant to the Capacity is
substantially changed (to the detriment of the terminating party) or found to be
unlawful or the relationship between the parties hereunder is found to be
unlawful by order of the highest court of competent jurisdiction to which the
matter is appealed, or the Federal Communications Commission ("FCC"), or of any
other local, state or federal government authority of competent jurisdiction.
6.3 Service Termination Rights
In addition to its rights in Sections 6.1 and 6.2 hereof, IFN shall
------------ ---
have the right, upon 30 day's prior written notice to ETC, to terminate any
Special Seller Facility or Capacity, or portion thereof, if such Special Seller
Facility or Capacity does not meet the specifications thereof set forth in
Exhibit A hereto. Such notice shall set forth a description of the Special
- ---------
Seller Facility and/or Capacity at issue and the cause for termination thereof.
ETC shall have an opportunity to cure such cause within 30 days after the date
of delivery of such notice. If such cure occurs within such 30-day period, ETC
shall continue to provide, and IFN shall continue to accept, such Special Seller
Facility or Capacity as if such written notice of termination had not been
given. If such cure does not occur within such 30-day period, then the
termination shall be effective at 11:59 P.M. E.S.T. on such 30th day.
12
<PAGE>
6.4 Termination of Exclusivity
6.4.1 The Covenant granting IFN the exclusive right to market
Available Capacity provided by ETC may be terminated, at ETC's sole discretion,
in the event that IFN fails to meet a minimum of 75% of it's Total Revenue
Commitment for any three consecutive months beginning in September, 1997,
subject to adjustment for any part of the Total Revenue that is not realized as
a result of failure by ETC to provide interconnection of Special Seller
Facilities to which it has committed. Should IFN and ETC be unable to agree on a
Total Revenue Commitment for any subsequent projection year, ETC may, at its
sole discretion, terminate the Covenant granting exclusivity to IFN.
ARTICLE 7 ADDITIONAL COVENANTS
7.1 Covenants of ETC
7.1.1 ETC hereby covenants to IFN that ETC will not sell or
otherwise market the Available Capacity to any other party or otherwise hold
itself out as a telecommunications carrier with respect to the Available
Capacity, except in the course of developing a relationship with another party
based on unique circumstances which would qualify that party as a House Account,
or upon the termination of exclusivity as outlined in Section 6.4 of this
agreement, or with IFN's consent.
7.1.2 ETC shall reimburse IFN for damages to facilities of IFN
that is caused by the negligence of ETC or resulting from Capacity or Special
Seller Facilities that do not meet the specifications set forth or referred to
in Exhibit A hereto.
---------
13
<PAGE>
7.2 Covenants of ETC and IFN
Each party shall promptly notify the other party of any action or
proceeding by or before any governmental authority pending or threatened that
might restrain, prohibit or invalidate the transactions contemplated by this
Agreement within five business days after such party learns of such an action or
proceeding. Each party shall cooperate with the other party in connection with
any such action or proceeding and shall permit the other party to participate,
at such other party's sole expense, in any such pending or threatened action or
proceeding.
ARTICLE 8 REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party hereto as
follows:
8.1 Authorization
The execution, delivery and performance by such party of this
Agreement and all other agreements and documents contemplated hereby, the
fulfillment of and the compliance with the respective terms and provisions
hereof and thereof, and the consummation by such party of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action of such party (which authorization has not been
modified or rescinded and is in full force and effect), and will not: (a)
conflict with, or violate any provision of, any term or provision of the
organizational documents such party or (b) conflict with, or result in any
breach of, or constitute a default under, any Agreement to which such party is a
party or by which such party is bound. No other corporate or partnership action
of such party is necessary for such party to
14
<PAGE>
enter into this Agreement and all other agreements and documents contemplated
hereby and to consummate the transactions contemplated hereby and thereby.
8.2 Binding Obligation
This Agreement constitutes a valid and binding obligation of such
party, enforceable in accordance with its terms. Each agreement or document to
be executed by such party pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of such party, enforceable in accordance with its terms.
8.3 Proceedings
Such party knows of no action or proceeding by or before any
governmental authority pending or threatened that would restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
ARTICLE 9 WARRANTY; LIMITATION OF LIABILITY
The quality of Capacity and Special Seller Facilities provided
hereunder shall be consistent with telecommunications industry standards,
applicable government regulations, sound business practices, and the
specifications set forth or referred to in Exhibit A hereto.
---------
ETC shall defend, indemnify, protect and hold harmless IFN, its
partners, directors, officers, employees, agents, affiliates and customers from
and against any and all losses, damages, liabilities and expenses arising out of
any claim(s) or action(s) based on allegation(s) that the use by IFN of the
Special Seller Facilities provided by ETC under this Agreement infringes any
United States or foreign patent(s) or other proprietary right(s). ETC shall pay
all royalties and other
15
<PAGE>
costs and expenses, including attorneys' fees, related to the defense,
settlement, or disposition of such infringement claim(s) or action(s). IFN shall
promptly notify ETC in writing of any such infringement claim or action and, at
ETC's sole expense, give ETC any assistance or information reasonably available
to IFN for the defense of such claim(s) or action(s).
Notwithstanding the foregoing, insofar as claim(s) or action(s) are
made by third parties with respect to the utilization by IFN of the Special
Seller Facilities provided by ETC pursuant to this Agreement, IFN shall defend,
indemnify, protect and save harmless ETC and its stockholders, directors,
officers, employees, agents, affiliates and customers from and against any and
all losses, damages, liabilities and expenses arising out of any claim(s) or
action(s) based on allegation(s) that the combination of the Special Seller
Facilities provided under this Agreement and any circuit, apparatus, system, or
facility provided by IFN infringes on any United States or foreign patent(s) or
other proprietary right(s). ETC shall promptly notify IFN in writing of any such
infringement claim or action and, at IFN's sole expense, give IFN any assistance
or information reasonably available to ETC for the defense of such claim(s) or
action(s).
ETC's liability, if any, arising out of delays in commencement or
restoration of the Capacity or Special Seller Facilities to be provided under
this Agreement or out of mistakes, accidents, omissions, interruptions, delays,
or errors or defects in transmission in the provision of Capacity or Special
Facilities hereunder shall in no event exceed the amount of the credit, if any,
available under Article 4 hereof. EXCEPT AS EXPRESSLY STATED IN THIS ARTICLE 9
--------- ---------
OR IN ARTICLE 4, SECTION 5.2, OR SECTION 7.1.2 HEREOF, IN NO EVENT SHALL EITHER
--------- ----------- -------------
PARTY HERETO BE LIABLE TO THE OTHER PARTY OR THE OTHER PARTY'S CUSTOMERS OR
CLIENTS OR ANY OTHER PERSON, FIRM OR
16
<PAGE>
ENTITY IN ANY RESPECT, INCLUDING, WITHOUT LIMITATION, FOR ANY DAMAGES, EITHER
DIRECT, INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL, ACTUAL, PUNITIVE, OR ANY
OTHER DAMAGES, OR FOR ANY LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER, ARISING
OUT OF MISTAKES, ACCIDENTS, ERRORS, OMISSIONS, INTERRUPTIONS, OR DELAYS,
INCLUDING THOSE WHICH MAY BE CAUSED BY REGULATORY OR JUDICIAL AUTHORITIES,
RELATING TO THIS AGREEMENT OR THE OBLIGATIONS OF SUCH PARTY PURSUANT TO THIS
AGREEMENT. EXCEPT AS EXPRESSLY STATED IN THIS ARTICLE 9 ETC MAKES NO WARRANTY,
---------
WHETHER EXPRESS, IMPLIED, OR STATUTORY, AS TO THE DESCRIPTION, QUALITY,
MERCHANTABILITY, COMPLETENESS OR FITNESS FOR ANY PURPOSE OF THE CAPACITY OR
SPECIAL SELLER FACILITIES PROVIDED HEREUNDER OR AS TO ANY OTHER MATTER.
ARTICLE 10 CUMULATIVE REMEDIES
Except as otherwise specifically provided for herein, the remedies set
forth herein shall be cumulative, and shall not preclude any party from
asserting any other rights or seeking any other remedies against the other
party, or such other party, successors or permitted assigns, pursuant to this
Agreement, as provided under other agreements, and as provided by applicable
law.
ARTICLE 11 OTHER VENTURES
Both parties 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 the operation of fiber optic
transmission facilities, except as specifically and explicitly limited pursuant
to
17
<PAGE>
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
pursuant to this Agreement, so long as a party does not violate any specific,
explicit restriction or obligation set forth in this Agreement.
ARTICLE 12 MISCELLANEOUS
12.1 Relationship of the Parties
Nothing in this Agreement shall be deemed to create any relationship
between ETC and IFN other than that of independent parties contracting with each
other solely for the purpose of carrying out the provisions of this Agreement.
Neither of the parties hereto shall be deemed or construed, by virtue of this
Agreement, to be the agent, employee, representative, partner, or joint venture
of the other. Neither party is authorized, by virtue of this Agreement, to
represent the other party for any purpose whatsoever without the prior written
consent of the other party.
Notwithstanding any other provision of this Agreement, this Agreement
applies only to Capacity and Special Seller Facilities provided to IFN, and
shall not apply to offerings by IFN of services to IFN's customers. The
provision of Capacity and Special Seller Facilities by ETC as set forth in this
Agreement does not constitute a joint undertaking with IFN for the furnishing of
any service to customers of IFN.
18
<PAGE>
12.2 Partial Exercise of Rights
Neither the waiver by either of the parties hereto of a breach or a
default under any of the provisions of this Agreement, nor the failure of either
of the parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder shall thereafter
be construed as a waiver of any subsequent breach or default of a similar
nature, or as a waiver of any such provisions, rights or privileges hereunder.
12.3 Force Majeure
In the event that either party'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, storm or other similar occurrence, any law, order,
regulation, direction, action or request of the United States government, or of
any state or local government, or of any department, agency, commission, court,
bureau, corporation or other instrumentality of any one or more such
governments, or of any civil or military authority, or by national emergency,
insurrection, riot or war, then such party shall be excused from such
performance on a day-to-day basis to the extent of such prevention, restriction
or interference. Such party shall use reasonable efforts under the circumstances
to avoid or remove such causes of nonperformance and shall proceed to perform
with reasonable dispatch whenever such causes are removed or cease. If such
failure of performance shall be for more than 30 days, then either party hereto
may immediately terminate this Agreement, with no liability on the part of any
party, by serving written notice to the other party of its intent to so
terminate this Agreement.
19
<PAGE>
12.4 Compliance with Applicable Law and Regulation
In connection with the matters provided for in this Agreement, each
party hereto shall comply with all applicable laws and regulations, including,
but not limited to, the Communications Act of 1934, as amended, and the
policies, rules and regulations of the FCC. In particular, IFN shall obtain all
required authorizations from, and file all required tariffs with, state
regulatory authorities and the FCC in order to offer telecommunications services
using the Capacity.
12.5 Notices
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other party
pursuant to this Agreement 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 ETC:
Entergy Technology Company
639 Loyola Ave.
New Orleans, LA 70113
Attention: General Manager
Telecopy No.: 504-576-6633
(ii) If to IFN:
Interstate FiberNet
206 West 9th Street
West Point, GA 31833
Attention: Chief Financial Officer
Telecopy No.706-645-8989
20
<PAGE>
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be mailed, delivered
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a telex) the answer back being deemed conclusive
(but not exclusive) evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
12.6 Entire Agreement; Amendment
This Agreement (including the Exhibits hereto) constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
and it supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein. The terms of
this Agreement may only be amended or modified by an instrument in writing
executed by the parties hereto.
12.7 Limitation on Benefits of this Agreement
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, 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.
21
<PAGE>
12.8 Binding Effect
Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
12.9 Governing Law
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of Arkansas (but not including the choice of law rules
thereof).
12.10 Survival of Terms
The terms and provisions contained in this Agreement that by their
sense and context are intended to survive the performance thereof by the parties
hereto shall so survive the completion of performance and termination of this
Agreement, including, without limitation, provisions for indemnification and the
making of any and all payments due hereunder.
12.11 Headings
Article, section and subsection 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.
22
<PAGE>
12.12 Pronouns
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular or plural as the identity of the
person or entity may require.
12.13 Severability
Except as set forth in Section 6.2.2 hereof, 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 or unenforceability only, without in any way affecting the
remaining parts of said provision or the remaining provisions of said agreement.
12.14 Assignment
This Agreement shall not be assignable by either party without the
prior written consent of the other party hereto, and any such assignment
contrary to the terms hereof shall be null and void and of no force and effect;
provided, however, that each party may assign this Agreement and its rights
- -------- -------
hereunder to any affiliate (as defined below) of such party upon written notice
to the other party hereto. In no event shall the assignment by either party
hereto of its respective rights or obligations under this Agreement release such
party from its respective liabilities and obligations hereunder. For purposes of
this Section 12.14, "affiliate" shall mean any person or entity which directly
-------------
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with such person or entity, and "control" shall mean
possession, directly or indirectly, of power
23
<PAGE>
to direct or cause the direction of management or policies (whether through
ownership of voting securities, by agreement or otherwise).
12.15 Counterparts
To facilitate execution, this Agreement 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 this 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.
12.16 Audit
IFN shall, throughout the term of this Agreement and for at least
three (3) years thereafter, keep and maintain such time and other records or
accounts of IFN and affiliates as are necessary to verify and support all
charges billed, or remittances made to, ETC or any of its subsidiaries or
affiliates, for the prior three year period from the date of the audit request.
This includes, but is not limited to, the verification that any and all
material, labor, expenses, and service incurred under this Agreement have been
paid. All books and records shall be maintained in accordance with generally
accepted accounting principles. Such books and records shall be made available,
within five (5) days or less of the request, at IFN's facility in the United
States for verification, copying, audit, and inspection by representatives of
Entergy or ETC. IFN shall provide assistance
24
<PAGE>
necessary to enable Entergy or ETC to conduct the audit. Any such audit shall be
at Entergy's or ETC's expense and conducted during IFN's normal working hours;
provided, however, that IFN shall provide reasonable assistance necessary to
enable Entergy or ETC to conduct such audit and shall not be entitled to charge
Entergy or ETC for any such assistance. Amounts incorrectly or inappropriately
invoice or remitted to ETC or IFN, whether discovered prior to or subsequent to
payment by either party, shall be adjusted or reimbursed to the applicable party
within five (5) days notification to IFN of the error.
Entergy and ETC shall have rights to information, records, and books of
subsidiaries and affiliates of IFN involving execution of this contract.
25
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement, or have caused this Agreement to be duly executed on their behalf, as
of the day and year first hereinabove set forth.
IFN:
Interstate FiberNet
By: ITC Transmission Systems, Inc.,
Managing Partner
By: /s/ Andrew M. Walker
-------------------------------
Name: /s/ Andrew M. Walker
-----------------------------
Title: President & CEO
----------------------------
ETC:
Entergy Technology Company
By: /s/ Earl J. Frederic
-----------------------------
Name: Earl J. Frederic
----------------
Title: General Manager
---------------
26
<PAGE>
Exhibit A
---------
Statement of Capacity and Special Seller Facilities
1. Type of Capacity
. DS1
. DS3
. VT1
. STS1
. STS12
. OC-3
. OC-3c
. OC-12
. OC-48
2. Technical Specifications Packages
---------------------------------
The compatibility requirements, technical specifications, and
generic requirements for service terminated at the customers
designated locations are referenced in Technical Reference ANSI
T1.404-1989 ANSI T1.403-1989 and ANSI T1.105-1991.
DS3 interface combinations and technical specifications are
referenced in Bellcore TR-INS-000342.
DS1 interface combinations and technical specifications are
referenced in Bellcore TR-NPL-000054.
STS-1, OC-1, OC-12 interface combinations and technical
specifications are referenced in BellSouth Telecommunications,
Inc. Technical Reference TR-73582.
ETC/Entergy Co-Location DS-3 interface technical specifications
are referenced in Entergy Technical Template #ETC/ENT-TT-
001.dwg attached to this exhibit.
3. Description of Special Seller Facilities
----------------------------------------
Any ancillary equipment needed to utilize the capacities
described in Paragraph 2 above. All equipment shall meet
applicable industry standards.
Interruption Definition & Calculation Procedures
------------------------------------------------
Allowance for Interruption of Service: An "Interruption"
means any two (2) second interval with a complete
interruption of transmission or a bit error rate worse than
I x 10/9/ for a particular communications path within a
route between two Lessor POPs (a "Route").
27
<PAGE>
Exhibit B
- ---------
Rates and Charges
Rates and Charges:
- -----------------
IFN shall compensate ETC for the use of the Capacity and Special Seller
Facilities as a percentage of gross revenue generated from sales to IFN's
customers (less any taxes billed) for all individual circuits sold by IFN during
a calendar month on the Entergy backbone communications network and defined as
Available Capacity. The percentage of gross amounts received by ETC during a
calendar month will be based upon IFN's sale of Available Capacity on the
Entergy system, and calculated in accordance with Exhibit C as follows:
R(ETC) = Revenue to ETC
R(CKT) = Revenue credited to a circuit
VH ROUTE = V&H(Air) Miles
Circuits which originate and terminate on, and traverse only, the ETC system:
R(ETC) = R(CKT) x Exhibit C Percentage
Circuits which originate and/or terminate on and/or off the ETC system, and
partially traverse the ETC system:
R(ETC) = R(CKT) x ETC (VH ROUTE) X Exhibit C Percentage
--------------
ETC (VH ROUTE) +
IFN (VH ROUTE)
DS1/DS3 Price Floors and OC-N Pricing:
- -------------------------------------
ETC and IFN agree that: (1) on at least an annual basis they will agree on a
minimum acceptable price for DS1 and DS3 circuits; (2) with respect to OC-N
pricing, IFN must obtain approval for all OC-N (OC-3, 12, 24, etc.) system
pricing and service terms prior to accepting an order for such a system, and ETC
will not unreasonably withhold approval of such system pricing and service
terms; (3) they may agree to revise a Price floor at any time; and (4) the
intent of setting Price Floors for services is to ensure that ETC will receive
compensation for all circuits incorporated by a reasonable cash flow and a
reasonable return on investment in the Network.
28
<PAGE>
Terms of Payment:
- ----------------
By the tenth (20th) day of each month, IFN will pay ETC compensation calculated
pursuant to the formula set forth in Schedule A, and using revenue from the
previous month regardless of whether the revenue is received from customers. At
such time, IFN shall also provide ETC with a summary of its calculations of all
amounts due to ETC pursuant to this Agreement for the preceding month. Exhibit D
---------
details the methodology that IFN uses to bill its customers.
IFN's obligation to pay ETC the compensation set forth above shall be subject to
IFN's right to deduct from any such compensation Delinquent Amounts, plus all of
IFN's out-of-pocket costs of collection of such amounts, including, but not
limited to, attorney's fees and disbursements and collection agency fees,
provided, however, that ETC shall not be responsible for reimbursing IFN for any
of IFN's out-of-pocket costs of collection from any customer that are in excess
of an amount equal to Delinquent Amounts actually received from such customer as
a result of IFN's collection activities. IFN will notify ETC within 60 days
after an amount becomes delinquent of any amounts that are at risk of not being
collected. IFN will use reasonable and customary efforts to collect Delinquent
Amounts during such 180 day period. If IFN receives any Delinquent Amount from
any customer after having been reimbursed by ETC for such amount, IFN will
promptly forward such amount to ETC.
29
<PAGE>
Exhibit C
- ---------
Compensation Schedule
Section 1.0
- -----------
IFN shall compensate ETC for the use of capacity and special seller facilities,
except in the case of House Accounts, as follows:
1. ETC shall receive, on a monthly basis, 75% of Gross Revenue when Gross
Revenue is at or below a level of $250,000.
2. ETC shall receive, on a monthly basis, 85% of the portion of Gross Revenue
above $250,000 when Gross Revenue is above a level of $250,000 and at
or below a level of $300,000.
3. ETC shall receive, on a monthly basis, 84% of the portion of Gross Revenue
above $300,000 when Gross Revenue is above a level of $300,000 and at
or below a level of $350,000.
4. ETC shall receive, on a monthly basis, 83% of the portion of Gross Revenue
above $350,000 when Gross Revenue is above a level of $350,000 and at
or below a level of $400,000.
5. ETC shall receive, on a monthly basis, 82% of the portion of Gross Revenue
above $400,000 when Gross Revenue is above a level of $400,000 and at
or below a level of $450,000.
6. ETC shall receive, on a monthly basis, 81% of the portion of Gross Revenue
above $450,000 when Gross Revenue is above a level of $450,000 and at
or below a level of $500,000.
7. ETC shall receive, on a monthly basis, 80% of the portion of Gross Revenue
above $500,000 when Gross Revenue is above a level of $500,000.
House Accounts:
- --------------
1. ETC shall receive, on a monthly basis, 85% of Gross Revenue attributable to
House Accounts.
30
<PAGE>
Section 2.0
- -----------
Commencing in April, 1997 and each April thereafter for the term of this
agreement, IFN will meet with ETC and provide ETC with revenue projections for
the subsequent twelve month period, beginning in July of the projection year.
Upon agreement between IFN and ETC, these projections will become IFN's Sales
Target for the applicable twelve month period.
31
<PAGE>
Exhibit D
---------
IFN shall bill its customers monthly, in advance, on the 20th day of the month
for their use of capacity on ETC's network. The first month of service will be
billed in arrears as a partial month in the next billing cycle if it is
installed after the 20th day of the month and as a partial month in the current
billing cycle if it is installed prior to the 20th day of the month.
IFN will promptly provide ETC a detail of (1) the current month billing journal
and (2) a detail of all circuits and the contract rate of those circuits
installed after the 20th day of the month and not included in the current
month's billing cycle, by the 2nd business day of the month that such circuits
are either billed or installed.
The above detail will be attached to the remittance to ETC to support the
calculation of the compensation paid by IFN determined under Exhibit B of this
---------
Agreement.
IFN will be required to compensate ETC only for charges that are actually billed
by IFN to IFN's customers.
32
<PAGE>
Exhibit E
---------
Available Capacity
February 1, 1997
<TABLE>
<CAPTION>
Segment Capacity (DS-3) SONET
<S> <C> <C>
Arkansas:
Little Rock-Pine Bluff 36 YES
Pine Bluff-Lake Village 36 YES
Arkansas-Louisiana:
Lake Village-West Monroe 9 YES
Arkansas-Mississippi:
Lake Village-Jackson 36 YES
Mississippi-Louisiana
Jackson-New Orleans 36 YES
Mississippi:
Jackson-Southaven 36 YES
Louisiana:
New Orleans-Baton Rouge 36 YES
Baton Rouge-Scott 36 YES
Scott-Lake Charles 36 YES
Louisiana-Texas:
Lake Charles-Beaumont 36 YES
Texas:
Beaumont-Conroe 36 YES
Conroe-Navasota 36 YES
Navasota-Bryan 36 YES
Conroe-Grangerland 12 YES
</TABLE>
33
<PAGE>
Exhibit F
- ---------
Interruption Credits
<TABLE>
<CAPTION>
===============================================================================
Customer Interruption Credit
<S> <C>
==============================================================================-
A In excess of 2 hours,
1/1440/1/ times Contract Rate/1/
-----
===============================================================================
B 5 mins. to 2hours-30% times Contract Rate
-----
2 hours-3hours-60% times Contract Rate
-----
3 hours-4hours-90% times Contract Rate
-----
4 or more hours-100% times Contract Rate
-----
===============================================================================
C 30 mins. or less-0% times Contract Rate
-----
30 mins.-1 hour-2% times Contract Rate
-----
each hour above 1 hour-additional 5% times Contract Rate
-----
(capped at 50% times Contract Rate for a single outage)
-----
================================================================================
D 1/1440 for each hour times Contract Rate
-----
================================================================================
E 1/1440 for each half hour times Contract Rate
-----
================================================================================
F 10 mins. to 2 hours-20% times Contract Rate
-----
2 hours-12 hours-50% times Contract Rate
-----
12 hours-24 hours-75% times Contract Rate
-----
24 hours or more-100% times Contract Rate
-----
================================================================================
</TABLE>
/1/ Explanation of Outage Denominator: 2 half hours per hour times 24 hours per
-----
day times 30 days per month = 1440 potential credit increments per month.
-----
/2/ Contract Rate means the monthly rate such customer pays.
34
<PAGE>
Exhibit 10.2
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (hereinafter referred to as the "License") is made
and entered into as of this 1st day of February, 1997, by and between
--- -------- --
Metropolitan Atlanta Rapid Transit Authority ("MARTA"), a Georgia public body
corporate, (hereinafter referred to as "Grantor"), and Interstate Fiber Net
("IFN"), a communication carrier organized and existing under the laws of the
State of Georgia, (hereinafter referred as "Grantee").
W I T N E S S E T H:
WHEREAS, MARTA is the owner of certain real property (the "Property")
constituting all that tract or parcel of land lying and being in Land Lot 14, of
the 14th District, Fulton County, Georgia, and being more particularly described
in Exhibit "A" attached hereto and made a part hereof;
WHEREAS, as Interstate Fiber Net wishes to use the Property for the sole
purpose of installing a 6" pipe for the installation of a fiber optic cable for
communication, to be bored and placed not less than nine (9) feet under the East
Line trackway near Harralson Avenue, west of Moreland Avenue ER Sta. 139+10+,
WHEREAS, MARTA wishes to grant Interstate Fiber Net a License Agreement to
the Property for such purpose on the terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the sum of Three Hundred
($300.00) Dollars a year, the receipt and sufficiency of which are hereby
acknowledge by MARTA and Interstate Fiber Net, MARTA and Interstate Fiber Net do
hereby agree as follows:
SECTION 1. Subject to the terms and conditions hereinafter set forth,
---------
including without limitation, Section 4, MARTA does hereby grant unto and in
favor of Interstate Fiber Net an exclusive License to use the property solely
for the purpose of installing a six (6) inch pipe for the installation of a
fiber optic cable for communication, to be bored and placed not less than nine
(9) feet under the East line trackway near Harolson Avenue, west of Moreland
Avenue, ER Sta. 139+10+.
SECTION 2. The term of this License shall be one (1) year, commencing
---------
on the date thereof and ending on the day before the first anniversary date
hereof, at midnight, unless earlier terminated pursuant to Sections 6, 8, 9, or
10 hereof. Any renewal of this License Agreement must be evidenced in writing
and must be signed by an agent of MARTA duly authorized to renew this License.
<PAGE>
Section 3. Interstate Fiber Net may use the surface of the property
---------
during the full term of the License, Interstate Fiber Net, and anyone acting on
behalf of Interstate Fiber Net, are expressly prohibited from entering into any
and all construction activities upon the property; provided, however, that
Interstate Fiber Net may perform construction activities consisting of boring
upon the property but only if prior to the commencement thereof a written
description of such construction activities is submitted to MARTA and approved
in writing by MARTA.
Section 4. MARTA hereby reserves the right to access upon, across and
---------
through the property for the maintenance, inspection, repair and replacement of
any and all facilities of MARTA located within, above or adjacent to the
property.
Section 5. Interstate Fiber Net is expressly prohibited from using the
---------
property for any commercial purpose whatsoever. Only Interstate Fiber Net or
such persons or entities as Interstate Fiber Net designates may use the
property. Interstate Fiber Net shall not allow the property to be used by the
general public.
Section 6. Interstate Fiber Net shall not further license, transfer,
---------
convey or assign the rights granted under this license. Any attempt to further
license, transfer, convey or assign such rights shall be void, and shall be
grounds for immediate termination by MARTA of this license.
Section 7. All time limits stated herein are of the essence of this
---------
license.
Section 8. Notwithstanding the term of this license as set forth in
---------
Section 2 above, MARTA reserves the right, upon thirty (30) days prior written
notice to Interstate Fiber Net, to terminate with or without cause this license,
said termination becoming effective on the date set forth in such notice.
Section 9. MARTA further reserves the right to immediately terminate
---------
this license, upon twenty-four (24) hours written notice to Interstate Fiber
Net, in the event of damage to or interference with any MARTA facilities located
within, above or adjacent to the property by any person or entity whatsoever.
Section 10. Interstate Fiber Net shall have the right at any time during
----------
the term hereof, upon thirty (30) days prior written notice to MARTA, to
terminate this license, said termination becoming effective on the date set
forth in such notice.
Section 11. At the expiration of the term of this license, or at the
----------
earlier termination hereof pursuant to Sections 6, 9, 10 or 11, Interstate Fiber
Net shall surrender the property to MARTA in substantially the same condition as
exists as of the date hereof.
Section 12. This License contains the entire agreement between MARTA and
----------
Interstate Fiber Net and no representations, inducements,
<PAGE>
promises or agreements, oral or otherwise, between MARTA and Interstate Fiber
Net with respect to the subject matter hereof not set forth herein shall be of
any force or effect. This license may be amended or modified only by an
instrument of equal formality signed by both MARTA and Interstate Fiber Net.
Section 13. MARTA expressly disclaims any warranty of title and any and all
----------
warranties as to the condition of the property and as to the fitness of the
property for any particular purposes.
Section 14. Both MARTA and Interstate Fiber Net expressly agree that no
----------
interest in real property whatsoever is hereby conveyed by this license, and
that use of the property by Interstate Fiber Net shall not be construed to be an
interest in real property of any kind whatsoever.
Section 15. This license may be executed in duplicate originals, each of
----------
which shall be deemed an original and shall constitute but one in the same
instrument.
Section 16. Any notice required or permitted to be given to MARTA and/or
----------
Interstate Fiber Net hereunder shall be in writing and sent first class or
delivered by hand and shall be addressed as follows to:
Metropolitan Atlanta Rapid Transit Authority
Department of Development and Operations
Manager of Real Estate
2424 Piedmont Road, Northeast
Atlanta, Georgia 30324-3330
Interstate Fiber Net
Mr. Frank Wilcox
910 First Avenue
West Point, Georgia 31833
<PAGE>
IN WITNESS WHEREOF, MARTA, acting by and through its duly authorized
officers, has caused this license to be executed and Interstate Fiber Net,
acting by and through its duly authorized officers, has caused this license to
be executed as of the date first above written.
Approved as to legal form:
[SIGNATURE ILLEGIBLE]
- ---------------------------------
Counsel, Metropolitan Atlanta
Rapid Transit Authority
METROPOLITAN ATLANTA RAPID
TRANSIT AUTHORITY
By: /s/ John R Brach
--------------------------
Name: John R. Brach
--------------------------
Title: Acting Vice President,
Development
--------------------------
ATTEST:
__________________________
Name: Richard H. Lovelace
--------------------------
Title: Manager of Real Estate
--------------------------
(Corporate Seal)
Approved as to legal form:
__________________________
INTERSTATE FIBER NET
By: /s/ Frank Wilcox
---------------------------
Name: Frank Wilcox
---------------------------
Title: VP OPERATIONS
---------------------------
ATTEST: /s/ Doug Shumate
---------------------------
Name: Doug Shumate
___________________________
Title:
___________________________
(Corporate Seal)
<PAGE>
Exhibit 10.3
CONTRACT No. IFN9301C
SUPPLY AGREEMENT FOR TRANSMISSION EQUIPMENT
BETWEEN
INTERSTATE FIBERNET, INC.
AND
NORTHERN TELECOM INC.
This is an agreement ("Agreement") by and between Interstate FiberNet, Inc. a
Delaware corporation with offices at 910 First Avenue, West Point, Georgia
31833, ("Buyer") and Northern Telecom Inc., a Delaware corporation with offices
located at 5550 Triangle Parkway, Norcross, Georgia 30092 ("Seller").
WITNESSETH that the parties hereto hereby agree as follows:
1. SCOPE
1.1 This Agreement sets forth the terms and conditions applicable to the
purchase by Buyer for itself and on behalf of its affiliates located
in Exhibit E ("Affiliates") and the sale by Seller of Seller's
equipment listed in Exhibit A ("Equipment"), any associated
engineering, installation or other services Seller has agreed to
perform ("Services"), and the licensing of any software ("Software"),
as subsequently defined herein and furnished in connection with the
Equipment.
1.2 Exhibit A may, by written agreement of Buyer and Seller, be amended
from time to time to add or delete transmission products offered for
sale by Seller, and/or to incorporate therein enhancements or new
features introduced in Equipment by Seller.
2. TERMS
This Agreement shall be effective on the date last signed, shall remain in
effect through December 31, 1995 ("Term"). This Agreement may be extended
for one or more successive periods by mutual written agreement of Buyer and
Seller.
3. EXHIBITS
The following Exhibits, attached hereto, are an integral part of this
Agreement and are incorporated herein by reference:
Exhibit A - Description of Equipment and Prices
Exhibit B - Delivery Intervals
Exhibit C - Buyer's Obligations
Exhibit D - Technical Support
Exhibit E - Affiliates
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CONTRACT NO. IFN9301C
4. ORDERING
4.1 During the Term of this Agreement and subject to the terms and
conditions contained herein, Buyer commits to purchase and take
delivery of Equipment having a minimum total price of Five Million
Dollars ($5,000,000.00) ("Total Commitment"). Buyer shall issue a
purchase order ("Purchase Order"), for the Equipment in accordance
with the following:
a) Upon signing this Agreement, Buyer shall issue a binding Purchase
Order in a minimum amount equal to the Total Commitment.
b) Buyer shall, from time to time, issue release orders ("Release
Orders"), to Seller. Each Release Order shall state the required
quantities and types of Equipment, any Services required and the
requested dates of Equipment delivery and the commencement dates
of any Services is to perform.
4.2 In order to permit Seller to meet delivery requirements, Buyer shall
issue a non-binding forecast showing the specific types and quantities
of Equipment to be released throughout the Term of this Agreement.
Buyer shall update such forecast each six (6) months.
4.3 The Purchase Order and all Release Orders issued by Buyer hereunder
and accepted in writing by Seller shall be deemed to incorporate and
be governed solely by the terms and conditions set forth in this
Agreement. Any printed terms and conditions contained on the front or
back side of any Purchase Order, Release Order or Seller's
acknowledgment shall be deemed deleted and of no force or effect. Any
typed and/or written terms and conditions contained in the Purchase
Order, Release Order or Seller's acknowledgment shall be for
administrative or information purposes only i.e., to identify the
----
scope of the Purchase Order or Release Order, the types and
quantities of Equipment, any Services to be supplied, any other
equipment covered by the Purchase Order or Release Order, line item
prices and total price, delivery and any other such information, all
in accordance with the provisions of this Agreement.
4.4 All Release Orders shall specify whether Seller is to (a) furnish the
Equipment without engineering or installation Services ("FO Orders"),
(b) furnish the Equipment with engineering services only ("E&F
Orders"), or (c) furnish the Equipment with engineering and
installation Services ("EF&I Orders"). With respect to E&F Orders and
EF&I Orders, the specific engineering and/or installation Services to
be
2
<PAGE>
performed by Seller shall be as more fully described in the applicable
Release order.
4.5 All Release Orders issued hereunder by Buyer are subject to written
acceptance by Seller within fifteen (15) days from Seller's receipt of
a Release Order. If a Release Order is not so accepted within such
fifteen (15) day period, such Release Order shall be deemed to be not
accepted and neither Buyer or Seller shall have any further obligation
with respect thereto except for Buyer's obligation to fulfill the
requirements of the Total Commitment.
4.6 Any requested change to a Release Order initiated by Buyer, after
Seller's acceptance of the Release Order, and any resulting
adjustments to prices, schedule and/or other requirements of the
Release Order shall be mutually agreed upon and subsequently detailed
in a written change to the Release Order ("Change Order"), referencing
the affected Release Order and executed by authorized representatives
of Buyer and Seller. Any adjustment to the prices for Equipment and
charges for any Services, as applicable, in a Change Order shall be
based on those Equipment prices set forth in Exhibit A and Seller's
then current charges for Services. In the event that the Change Order
affects work already performed, the adjustment of the Release Order
price shall include reasonable charges incurred by Seller related to
such work. Seller shall at Buyer's request, substantiate such costs.
No such changes shall be performed until a Change Order has been
executed by Seller and Buyer as described above.
5. PRICES
5.1 Equipment prices applicable to Orders and Release Orders for Equipment
issued and accepted hereunder shall be Seller's prices set forth in
Exhibit A. Such prices are based on cash sales and contain no
provision for financing by Northern Telecom Finance Corporation
("NTFC") or Communications Credit Corporation ("CCC"). Buyer shall not
enter into any finance agreement with NTFC or CCC for Equipment
purchased hereunder without prior written approval of Seller.
5.2 The prices for engineering, installation and/or system line-up and
testing ("SLAT") Services performed by Seller with respect to an E&F
or EF&I Release Order issued and accepted hereunder shall be as quoted
by Seller and agreed to by Buyer prior to issuance of the applicable
Release Order. Additional expenses incurred by Seller in the
performance of its Services which result from errors or omissions in
information provided by Buyer shall be billable to Buyer. Buyer shall
be advised by Seller as soon as practicable when such additional
expenses are
<PAGE>
CONTRACT NO. IFN9301C
incurred. Seller shall, at Buyer's request, substantiate all such
increases.
5.4 The prices of imported Equipment, if any, set forth in Exhibit A,
include any applicable U.S. import duties and customs charges.
5.5 The prices shown in Exhibit A are FOB Seller's plant. Seller will
prepay freight charges for the Equipment shipped from Seller's factory
to Buyer and invoice Buyer at cost. These Charges will appear as
separate line items on the invoice.
5.6 Equipment prices and charges for any Services set forth in Exhibit A
do not include Federal manufacturer's and retailer's excise tax, state
or local sales and/or use taxes, nor any federal, state or local taxes
of a similar nature. All such taxes, if applicable to payable by
Seller in connection with its performance under this Agreement, shall
be billed to and paid by Buyer as in accordance with Section 6.
5.7 Until the total price specified in each Release Order is paid to
Seller by Buyer, Seller shall retain and Buyer hereby grants to Seller
a purchase money security interest in the Equipment covered that
Release Order. Buyer shall cooperate with Seller in perfecting such
interest. Prior to the time any Equipment is paid for in full to
Seller, Buyer shall not sell or lease such Equipment or allow any
liens or encumbrances to attach to any Equipment without prior written
permission of Seller.
6. TAXES
6.1 Buyer shall promptly reimburse Seller, upon demand, or shall pay
directly, if so requested by Seller, all taxes and charges imposed by
any federal, state, or local governmental or taxing authority,
relating to the purchase, ownership, possession, use, operation or
relocation of Equipment purchased, excluding, however, all taxes
computed upon the net income of Seller.
6.2 In the event Buyer disputes the taxes billed on any invoice then, upon
Buyer's written request, the parties shall consult with respect to the
basis and the rates upon which Seller shall pay any taxes for which
Buyer is obligated to reimburse Seller under this Agreement. If Buyer
determines that in its opinion any such taxes are not payable or
should be paid less than the full rate or amount of tax billed, Buyer
will promptly notify Seller in writing within thirty (30) days from
the date of the disputed invoice by certified mail. Buyer will pay to
Seller the total amount of taxes both disputed and undisputed which
federal, state or local taxing authorities, deem payable.
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CONTRACT NO. IFN9301C
6.3 In the event disputed taxes have been paid by Seller to a taxing
authority and Buyer elects to seek a refund, Seller will then assign
its rights of refund to Buyer so that Buyer may petition the taxing
jurisdiction for any refunds Buyer may establish as appropriate. If
rights of refund cannot be assigned to Buyer, Seller will file the
claim for a refund on Buyer's behalf. Buyer will be responsible for
providing any required documentation that will accompany the claim for
refund and such information should be submitted to Seller for
submission to the applicable taxing jurisdiction.
6.4 Buyer agrees to pay and hold Seller and its affiliates harmless from
and against any penalties, interest, audit assessments or any other
type of assessment imposed by any taxing jurisdiction, related to
taxes reimbursable under this Agreement.
6.5 In the event any taxing authority advises Seller that it intends to
audit Seller with respect to any disputed taxes for which Buyer is
obligated to reimburse Seller under this Agreement, Seller shall
provide Buyer with written notice of such audit and keep Buyer
informed as to the progress of the audit. Seller will allow Buyer,
sixty (60) days from the date of Seller's written notice to Buyer to
present to the taxing authority any information that may defend
Buyer's position.
7. DELIVERY
7.1 Risk of loss or damage to Equipment contained in each shipment shall
pass to Buyer upon delivery thereof to a carrier at Seller's
manufacturing plant. With respect to Equipment ordered on an EF&I
basis, Seller shall at its expense, remedy any damage to such
Equipment when such damage is caused by the negligence or willful
misconduct of Seller's personnel during installation and SLAT. Title
to Equipment supplied hereunder, excluding Software, shall vest in
Buyer upon full payment thereof by Buyer.
7.2 The normal delivery intervals applicable to Equipment furnished
hereunder shall be those intervals shown in Exhibit B however,
Seller's only obligation shall be to meet delivery dates set forth in
an accepted Release Order. If Seller, prior to acceptance of a Release
Order, advises Buyer that it cannot meet a delivery date requested in
the Release Order, both parties will negotiate a revised date prior to
Seller's acceptance of the Release Order. The installation and SLAT
intervals applicable to each EF&I Release Order shall be quoted by
Seller and agreed to by Buyer prior to issuance of such Release Order.
7.3 In the event of a delay in delivery of Equipment, which is the subject
of an accepted Release Order, beyond the date agreed upon in such
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<PAGE>
CONTRACT NO. IFN9301C
Release Order and such delay is not excused under the provisions of
Section 13 hereof, then upon Buyer's request, shipment of the delayed
Equipment when ready to ship shall be made specifying priority
transportation, and, in such circumstances, the amount by which the
cost of such priority transportation exceeds the cost of
transportation that would have been payable by Buyer pursuant to
Section 5.5 shall be borne by Seller.
8. PAYMENT
8.1 Seller shall invoice Buyer upon shipment of the Equipment and Buyer
shall pay to Seller the price of each shipment of Equipment (including
any freight and/or insurance prepaid by Seller) within thirty (30)
days from the date of invoice. Charges for Services rendered hereunder
shall be invoiced at the completion of such Services, and paid by
Buyer within thirty (30) days from date of Seller's invoice Therefor.
8.2 Overdue payments may, at Seller's sole discretion, be subject to
interest charges, calculated daily from the due date, at one and one
half percent (1 1/2%) per month or such lesser rate as may be the
maximum permissible rate under applicable law.
9. TECHNICAL SPECIFICATIONS
9.1 The technical specifications applicable to Equipment supplied
hereunder shall be Seller's standard published performance
specifications for such Equipment which are hereby incorporated
herein by reference, as such specifications may be amended from time
to time by Seller ("Specifications").
9.2 The current S/DMS TransportNode Equipment is compliant with SONET
Phase II standards. During the Term of the Agreement, Seller is
committed to evolve its S/DMS TransportNode Equipment to comply with
emerging SONET standards.
10. SOFTWARE LICENSE
10.1 Software licensed under this Agreement is defined as computer
programs contained on a magnetic tape, disc, semiconductor device or
other memory device or system memory consisting of (a) hard wired
logic instructions which manipulate data in the central processor and
control input-output operations and error diagnostic and recovery
routine, (b) instruction sequences in machine-readable code that
control call processing, or other operating functions, peripheral
equipment or administration and maintenance functions and (c)
6
<PAGE>
CONTRACT NO. IFN9301C
associated documentation used to describe, maintain and use the
programs.
10.2 Upon Buyer's payment of the applicable Right to Use Fees or Software
License Fees, if any, Buyer, or its Affiliate as appropriate, is
hereby granted a perpetual, non-exclusive, paid-up license to use the
version of the Software furnished. Buyer, or its Affiliate as
appropriate, is granted no title or ownership rights to the Software,
such rights shall remain in Seller or Seller's suppliers as
appropriate. Seller may, from time to time, issue updates to the
Software and, upon Buyer's payment of applicable Right to Use Fees or
Software License Fees, if any, shall license these updates to Buyer,
or its Affiliate as appropriate. Seller shall classify such updates as
either: 1) Incremental Software Upgrades ("ISU's"), designed to
correct any nonconformance to the applicable Software specifications
or 2) enhancements which will provide additional features. Updates to
Software classified, as ISU's by Seller will be provided at no cost to
Buyer, or its Affiliate as appropriate. Updates classified as
enhancements, which will be used by Buyer, or its Affiliate as
appropriate, in its operations shall be made available to Buyer on a
billable basis. In the event Seller determines that the update
includes both corrections and enhancements which will be used by
Buyer, or its Affiliate as appropriate, in its operations, such update
shall be made available to Buyer, or its Affiliate as appropriate. If
Buyer, or its Affiliate as appropriate, elects to receive the update,
Seller shall invoice Buyer only for the amount determined by Seller to
be attributed to the enhancements contained in such update.
10.3 Buyer agrees that the Software, including without limitation, any
additional or modified Software which operates the Equipment, shall,
as between the parties hereto be treated as the exclusive property of
Seller or Seller's suppliers, as appropriate, and as proprietary and a
TRADE SECRET of Seller or Seller's suppliers, as appropriate, and
Buyer shall:
a) hold the Software (including any methods or concepts utilized
therein) in confidence for the benefit of Seller or Seller's
suppliers as appropriate;
b) utilize the Software (including any methods or concepts utilized
thereof) solely in conjunction with the Equipment;
c) not duplicate, copy, or modify the Software in whole or in part
except solely for backup or archival purposes;
d) not decompile or attempt to reverse engineer the Software;
7
<PAGE>
e) forthwith return to Seller any Software component and/or
documentation which has been replaced, modified, or updated.
10.4 Buyer, or its Affiliate as appropriate, and any successor to Buyer's,
or its Affiliate's, title in the Equipment shall have the right
without further consent of Seller (a) to assign this license to any
other party who acquires legal title to the Equipment, and (b) to
sublicense the rights herein granted to any other party who
subsequently acquires the right to use the Equipment, provided that
any such other party (either assignee or sublicensee) prior to the
transfer of the Software, agrees in a writing addressed to Seller to
abide by the terms and conditions of this license.
105. The obligations of Buyer under this Software license shall survive the
termination of this Agreement, regardless of the cause termination.
11. BUYER'S OBLIGATIONS
In order to enable Seller to perform its obligations pursuant to E&F
Release Orders to EF&I Release Orders, Buyer agrees to fulfill Buyer's
obligations set forth in Exhibit C and any additional obligations that may
be mutually agreed between Buyer and Seller in relation to a Specific
Release Order.
12. ACCEPTANCE
12.1 With respect to Equipment ordered on a FO or E&F basis, Buyer's
acceptance of the Equipment shall be deemed to have taken place at
Seller's factory upon completion by Seller of its standard factory
test as evidenced by the test results showing that Equipment meets the
applicable performance parameters set forth in the applicable
Specifications.
12.2 With respect to Equipment ordered on an EF&I basis, Buyer's acceptance
of the Equipment shall take place, or be deemed to have taken place,
upon Seller's completion of the installation and SLAT Services, which
Seller agreed to perform in a Release Order. Such Services shall be
performed in accordance with Seller's standard procedures and
practices, as evidenced by the test results showing that the Equipment
meets the applicable performance parameters set forth in the
Specifications. Such acceptance shall not be withheld or postponed due
to:
a) performance deficiencies of the Equipment or any other equipment
with which such Equipment is used or operated resulting from causes
not attributable to Seller, such as but not limited to (i)
incompleteness or inaccuracy of information
8
<PAGE>
provided by Buyer, (ii) inadequacy or deficiencies of equipment,
facilities or services not provided by Seller which are tested in
conjunction with Equipment, or (iii) other conditions, external
to the Equipment provided by Seller, which are beyond the
specified limits and are used by Seller in performance
calculations which may be submitted in Seller's quotation; and
spurious outputs from adjacent equipment. Seller shall, at
Buyer's expense, assist Buyer in the elimination or minimization
of such deficiencies; or
(b) minor deficiencies of shortages, attributable to Seller, of a
nature that would not prevent commercial operation of the
Equipment; Seller shall, however, at its expense, take prompt and
effective action to correct any such deficiencies or shortages.
The expenses incurred by Seller in the investigation of the
causes of any performance deficiencies shall be borne by Buyer
if the deficiencies do not result from causes attributable to
Seller.
13. WARRANTY
13.1 In those instances when Seller does not perform installation Services,
Seller warrants to Buyer, or its Affiliate as appropriate, that
Equipment supplied hereunder, excluding Software, will, under normal
use and service, be free from defective material and faulty
workmanship and will perform in accordance with the applicable
Specifications for a period of twelve (12) months from the date of
shipment or, if the date of shipment is not marked on the Equipment,
fifteen (15) months from the date of manufacture. In the event Seller
performs installation Services, the Equipment warranty shall be twelve
(12) months from the date of acceptance as set forth in Section 12.
This warranty does not apply to items normally consumed in operation,
such as, but not limited to, lamps and fuses. Seller further warrants
that any engineering and installation Services performed by Seller
will be free from defects in workmanship for the duration of the
Equipment warranty period. Seller's sole obligation and Buyer's
exclusive remedy under this warranty are limited to the replacement or
repair, at Seller's option and expense, of the defective Equipment, or
correction of the defective engineering and installation Services.
Such obligation and remedy are conditional upon the Equipment not
having been altered or repaired by any party other than Seller without
Seller's prior written consent, and the defect not being the result of
Buyer's mishandling, abuse, misuse or improper storage, installation,
operation, or maintenance, or other causes not imputable to Seller and
upon the Equipment not having been damaged by fire, explosion, power
failure, lightning, or any other act of nature or public enemy. The
repair or replacement of the defective Equipment and the correction of
defective
9
<PAGE>
engineering and installation Services shall be warranted for a period
of ninety (90) days or the remainder of the original Equipment
warranty period whichever is longer.
13.2 Seller warrants to Buyer, or its Affiliate as appropriate, that any
Software licensed by Seller under this Agreement shall function during
the warranty period of the Equipment with which such Software is
furnished without material service-affecting deficiencies which result
from a defect in the Software. Buyer's sole remedy and Seller's sole
obligation under this warranty are for Seller to correct such defect
in the Software. Such obligation and remedy are conditioned upon: (a)
the defect being properly attributable to Seller or Seller's
suppliers; (b) such Software not having been installed outside the
United States; and (c) written notice of the defect having been given
to Seller within the applicable warranty period. The correction of any
such failure shall not extend the applicable warranty period.
13.2 Upon expiration of the applicable warranty period for Equipment
furnished hereunder, repair and replacement service for such Equipment
shall be available to Buyer from Seller in accordance with Seller's
procedures and charges then in effect conditioned upon the Equipment
not having been altered or repaired by any party other than Seller
without Seller's prior written consent, and upon the Equipment not
having been damaged by fire, explosion, power failure, or any act of
nature or public enemy. Such repair and replacement service shall be
available for a minimum period of ten (10) years from the commencement
date of this Agreement. Seller shall provide Buyer with a twelve (12)
month prior written notice of any discontinuance so as to enable Buyer
to place an order for its requirements or to enter into any other
mutually satisfactory agreement with Seller prior to such
discontinuance. This provision shall survive the expiration of this
Agreement.
13.4 Repairs or replacements provided after the expiration of the warranty
period are warranted by Seller, as provided in Section 13.1 hereof,
for a period of ninety (90) days from the date of shipment of such
repair or replacement.
13.5 The warranty applicable to equipment manufactured by others and resold
by Seller shall be the manufacturer's warranty for such equipment
only. No warranty of such equipment is offered or made by Seller
except to the extent that when the equipment manufactured by others is
a incorporated as a component of Equipment manufactured by Seller,
i.e. transistors, capacitors and resistors the in such cases the
----
Equipment warranty shall apply.
10
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CONTRACT NO. IFN9301C
13.6 Neither Seller nor Seller's suppliers, as appropriate, shall have any
responsibility for warranties offered by Buyer to any of its customers
with respect to the performance of any Equipment or Software over and
above those warranties set forth herein. Buyer shall indemnify Seller
and/or Seller's suppliers, as appropriate, with respect thereto.
13.7 All equipment to be repaired or replaced both within and out of
warranty shall be packed by Buyer in accordance with Seller's
instructions as set forth in Exhibit D and shipped, at Buyer's expense
and risk of loss, to a location designated by Seller prior to such
shipment. Repaired or replaced Equipment shall be returned to Buyer at
Seller's expense and risk of loss.
13.8 Seller warrants that Equipment delivered to Buyer is free and clear of
all liens and encumbrances.
13.9 THE FOREGOING WARRANTIES AND REMEDIES CONSTITUTE THE ONLY WARRANTIES
WITH RESPECT TO EQUIPMENT AND INSTALLATION THEREOF AND SOFTWARE AND
BUYER'S EXCLUSIVE REMEDIES IN THE EVENT SUCH WARRANTIES ARE BREACHED.
SUCH WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, WRITTEN OR ORAL,
STATUTORY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY
WARRANTY WITH RESPECT TO ANY OTHER SERVICES PROVIDED BY SELLER
HEREUNDER OR OTHERWISE, AND ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. SELLER SHALL NOT BE LIABLE FOR ANY
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE FOR ANY
REASON.
14. FORCE MAJEURE
If the performance of any obligation under this Agreement, Order or an
Release Order is interfered with by reason of any circumstances beyond the
reasonable control of the party affected, including, without limitation,
fire, explosion, power failure, acts of God, war, revolution, civil
commotion, delays of the other party in the performance of any of its
obligations hereunder, delays of subcontractors, or suppliers,
unavailability of sources of energy, acts of the public enemy, or any law,
order, regulation, ordinance or requirement of any government or legal
body, and labor difficulties, including without limitation, strikes,
slowdowns, picketing or boycotts; then the party affected shall be excused
from such performance for a period equal to the delay resulting from any
such causes and such additional period as may be reasonably necessary to
allow the party to resume its obligations, (and the other party shall
likewise be excused from performance of its obligations to the extent such
party's obligations relate to the performance to interfered
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CONTRACT NO. IFN9301C
with). The party so affected shall make reasonable efforts to remove such
causes of nonperformance; provided, however, in the context of labor
difficulties, that a party shall not be obligated to accede to any demands
being made by employees or other personnel.
15. PATENT INFRINGEMENT
15.1 Seller shall defend Buyer with respect to any suit, claim, or
proceeding brought against Buyer alleging that Buyer's use of
Equipment or Software furnished hereunder constitutes an infringement
of any attorney's fees, settlement payments and damages awarded as a
result of such claims, provided, however, that Buyer shall promptly
advise Seller of any suit, claim, or proceeding and shall cooperate
with Seller in the defense or settlement of such suit, claim or
proceeding, but Seller shall have sole control thereof.
15.2 In the event that an injunction is obtained against Buyer's use of
such Equipment or Software arising from such patent suit, claim or
proceeding, in whole or in part, Seller shall use its best efforts to
either: (a) procure for Buyer the right to continue using the portion
of Equipment and/or Software enjoined from use; of (b) replace or
modify the same so that Buyer's use is not subject to any such
injunction. In the event that Seller cannot perform under (a) or (b),
Buyer shall have the right to return such Equipment and/or Software to
Seller upon written notice to Seller and in the event of such return,
neither party shall have any further liabilities or obligations under
this Agreement Order or applicable Release Order except that Seller
shall refund the depreciated value of such Equipment and/or Software
as carried on Buyer's books at the time of such return.
15.3 This indemnity shall not apply to claims arising in respect of the
use of Equipment of Software supplied by Seller in accordance with
any design or special instructions furnished by Buyer, or which is
used by Buyer in a manner or for a purpose not contemplated by this
Agreement and Buyer shall indemnify Seller in such excepted cases as
set forth in Section 15.1.
15.4 The foregoing provisions of this Section 15 set forth the sole and
exclusive rights and obligations of Buyer and Seller with respect to
any infringement or claim of infringement as to the Equipment or
Software.
12
<PAGE>
CONTRACT NO. IFN9301C
16. CONFIDENTIAL INFORMATION
All technical information, specifications, drawings, documentation and
"know-how" of every kind and description whatsoever disclosed by either
party to the other under this Agreement ("Information"), except insofar as
it may be in the public domain or be established to have been independently
developed and so documented by the other party or obtained by the other
party from any person not in breach of any confidentiality obligations to
the disclosing party, is the exclusive property of this disclosing party,
and the other party, except as specifically authorized in writing by the
disclosing party, or as permitted hereunder, shall treat and protect the
Information as confidential, shall not reproduce the Information except to
the extent reasonably required for the performance of this Agreement, shall
not divulge the Information in whole or in part to any third parties, and
shall use the Information only for purposes necessary for the performance
of this Agreement or as may be required for the use of Equipment. This
obligation shall survive the termination of this Agreement. Each party
shall disclose the Information only to those of its employees and agents
who shall have a "need-to-know" the Information for the purposes described
herein after first making such employees or agents aware of the
confidentiality obligations set forth above.
17. LIABILITY
Each party hereto shall indemnify and save the other harmless from any
liabilities, claims or demands (including the costs, expenses and
reasonable attorney's fees on account thereof) that may be made by anyone
for personal injuries, including theft, death, or damage to tangible
property, resulting from the negligence and/or willful misconduct of that
party, its employees or agents in the performance of this Agreement. Each
party shall defend the other at the other's request against any such
liability, claim or demand. Each party shall notify the other promptly of
written claims or demands against such party of which the other party is
responsible hereunder.
18. TECHNICAL SUPPORT
Seller will support Equipment supplied hereunder as describe in Exhibit D
attached hereto.
19. DEFAULT
19.1 In the event of any material breach of this Agreement, Order or any
Release Order by either party which shall continue for thirty (30) or
more days after written notice of such breach including a reasonably
detailed statement of the nature of such breach shall have been given
to the breaching party by the aggrieved party, the aggrieved party
shall
13
<PAGE>
CONTRACT NO. IFN9301C
be entitled, subject to any limitations contained in this
Agreement, to avail itself of any and all remedies available at law
or equity. Notwithstanding the foregoing, in the event Buyer
remains in breach of Section 8.1 for a period of five (5) or more
business days following receipt of Seller's written notice, Seller
may suspend performance of all of its obligations under this
Agreement, Order or applicable Release Order for so long as the
breach continues uncorrected.
19.2 Seller may suspend its performance by written notice to Buyer and
forthwith remove and take possession of any portion of Equipment
and Software which has been delivered but not yet paid for if
Buyer, prior to payment to Seller of the total purchase price and
all additional monies due, shall become insolvent or bankrupt, make
a general assignment for the benefit of, or enter into any
arrangement with, creditors, file a voluntary petition under any
bankruptcy, insolvency, or similar law, or have proceeding under
any such laws or proceedings seeking appointment of a receiver,
trustee or liquidator instituted against it which are not
terminated within thirty (30) days of such commencement.
19.3 Any action for breach of this Agreement or to enforce any right
hereunder shall be commenced within two (2) years after the cause
of action accrues or it shall be deemed waived and barred.
19.4 IN NO EVENT SHALL SELLER BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER FOR ANY BREACH OF
THIS AGREEMENT OR OTHERWISE. THIS LIMITATION SHALL SURVIVE ANY
TERMINATION OF THIS AGREEMENT.
20. PUBLICITY
Prior to the publication or use by a party hereto of any advertising, sales
promotions, press releases or other publicity matters relating to the
Equipment or this Agreement in which the names or logo of the other party
is mentioned or can be reasonably inferred, the party shall obtain the
consent of the other party. Such consent shall not be unreasonably
withheld.
21. SEVERABILITY
If any of the provisions of this Agreement shall be adjudged invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render this Agreement unenforceable, but rather this Agreement shall be
construed as if not containing the particular invalid or unenforceable
provision or provisions, and the rights and obligations of the parties
shall be construed and enforced accordingly, provided that, in the event
either Buyer
14
<PAGE>
CONTRACT NO. IFN9301C
or Seller would not have entered into this Agreement without such
provision, that party shall have the right to terminate this Agreement.
22. NOTICES
Notices and other communications shall be transmitted in writing by
certified U.S. Mail, postage prepaid, return receipt requested, or by
cable, telegram, or guaranteed overnight delivery addressed to the parties
as follows:
To Buyer: Interstate FiberNet, Inc.
910 First Avenue
West Point, Georgia 31833
Attention: General Manager
--
To Seller: Northern Telecom Inc.
5550 Triangle Parkway
Norcross, Georgia 30092
Attention: Vice President, Carrier Networks
Any notice or communication sent under this Agreement shall be deemed given
upon receipt, as evidenced by the U.S. Postal Service return receipt form,
but in no event later than ten (10) days after it is deposited in the U.S.
Mail or, on the following business day if sent by guaranteed overnight
delivery.
23. GOVERNING LAW
The construction, interpretation and performance of the Agreement shall be
governed by the laws of the State of Georgia, except for its rules with
respect to the conflict of laws.
24. ASSIGNMENT
Neither party may assign or transfer this Agreement or any rights hereunder
without the prior written consent of the other party, except that Seller
may assign or subcontract any of its obligations hereunder to any of its
affiliate companies.
25. WAIVER
Except as specifically provided for in a waiver signed by duly authorized
representatives of Buyer and Seller, failure by either party at any time to
require performance by the other party or to claim a breach of any
provision of this Agreement shall not be construed as affecting any
subsequent breach or the right to require performance with respect thereto
or to claim a breach with respect thereto.
15
<PAGE>
CONTRACT NO. IFN9301C
26. SECTION HEADINGS
Section headings are inserted herein for convenience only and shall not
affect the meaning or interpretation of this Agreement or any provision
hereof.
27. ENTIRE AGREEMENT
This Agreement, including Exhibits A, B, C, D, and E attached hereto,
comprises all the terms, conditions and agreements of the parties hereto
with respect to the subject matter herein, and save as expressly provided
herein, may not be altered or amended except in writing signed by
authorized representatives of each party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year last written below.
INTERSTATE FIBERNET, INC. NORTHERN TELECOM INC
/s/ Steven D. Moses /s/ Gary L. Wingo
- ------------------------------ ---------------------------------------
Signature Signature
Steven D. Moses Gary L. Wingo
- ------------------------------ ---------------------------------------
Name (Please Print or Type) Name (Please Print or Type)
General Manager VP Carrier Networks
- ------------------------------ ---------------------------------------
Title Title
3-26-1993 3/26/93
- ------------------------------ ---------------------------------------
<PAGE>
EXHIBIT 10.4
CONTRACT NO. IFN9301C
AMENDMENT NO. 1
AMENDMENT NO. 1
TO
THE SUPPLY AGREEMENT
FOR
TRANSMISSION EQUIPMENT
BETWEEN
INTERSTATE FIBERNET, INC.
AND NORTHERN TELECOM INC.
This Amendment No. 1 to the Supply Agreement for Transmission Equipment between
Interstate Fibernet, Inc. and Northern Telecom Inc., Contract No. IFN9301C ("the
Agreement") shall be effective on the date last signed.
All Capitalized terms which are defined in the Agreement shall have the same
meaning in this Amendment No. 1 as in the Agreement.
WHEREAS, Buyer and Seller wish to outline the terms for Affiliate purchases of
Equipment from Seller,
NOW Therefore, the Agreement is hereby modified as follows:
1. Section 4, "Ordering," is hereby deleted in its entirety and replaced with
Section 4 attached hereto;
2. Section 8, "Payment," is hereby deleted in its entirety and replaced with
Section 8 attached hereto;
All other terms and conditions shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year last written below.
INTERSTATE FIBERNET, INC. NORTHERN TELECOM INC.
By:/s/ Steven D. Moses By: /s/ B. Mallicote for G. Wingo
----------------------------- -------------------------------
(Signature) (Signature)
Name:/s/ Steven D. Moses Name:/s/ BETSY MALLICOTE
--------------------------- -----------------------------
(Print) (Print)
Title: General Manager Title: SR. MANAGER
-------------------------- ----------------------------
Date: Sept. 2, 1993 Date: 9/9/93
--------------------------- -----------------------------
<PAGE>
CONTRACT NO. IFN9301C
AMENDMENT NO.1
PAGE 2 OF 2
Amendment No. 1 to the Supply Agreement for Transmission Equipment between
Interstate Fibernet, Inc. and Northern Telecom Inc., Contract No. IFN9301C is
hereby approved by an authorized representative of Northern Telecom Inc.
NORTHERN TELECOM INC.
BY: /s/ Gary L. Wingo
------------------------------
(Signature)
Name: Gary L. Wingo
----------------------------
(Print)
Title: VP Carrier Networks
---------------------------
Date: 9/13/93
----------------------------
<PAGE>
CONTRACT NO. IFN9301C
PAGE 1 0F 3
4. ORDERING
4.1 During the Term of this Agreement and subject to the terms and
conditions contained herein, Buyer commits to purchase and take
delivery of Equipment having a minimum total price of Five Million
Dollars ($5,000,000.00) ("Total Commitment"). Buyer shall issue a
purchase order ("Purchase Order"), for the Equipment in accordance
with the following:
a) Upon signing this Agreement, Buyer shall issue a binding Purchase
Order in a minimum amount equal to the Total Commitment.
b) Buyer shall, from time to time, issue release orders ("Release
Orders"), to Seller. Each Release Order shall state the required
quantities and types of Equipment, any Services required and the
requested dates of Equipment delivery and the commencement dates
of any Services Seller is to perform.
c) Affiliates may, from time to time, issue Release Orders to
Seller. However, for a Release Order issued by an Affiliate to be
considered a qualified purchase under the Supply Agreement, such
Release Order must state that the transaction is covered by the
terms and conditions of this Agreement. Affiliates' purchases of
Equipment shall be applied towards Buyer's fulfillment of the
Total Commitment.
4.2 In order to permit Seller to meet delivery requirements, Buyer shall
issue a non-binding forecast showing the specific types and quantities
of Equipment to be released throughout the Term of this Agreement.
Buyer shall update such forecast each six (6) months.
4.3 The Purchase Order and all Release Orders issued by Buyer and its
Affiliates hereunder and accepted in writing by Seller shall be deemed
to incorporate and be governed solely by the terms and conditions set
forth in this Agreement. Any printed terms and conditions contained on
the front or back side of any Purchase Order, Release Order or
Seller's acknowledgement shall be deemed deleted and of no force or
effect. Any typed and/or written terms and conditions contained in the
Purchase Order, Release Order or Seller's acknowledgment shall be for
administrative or information purposes only i.e. to identify the scope
----
of the Purchase Order or Release Order, the types and
<PAGE>
CONTRACT NO. IFN9301C
PAGE 2 0F 3
quantities of Equipment, any Services to be supplied, any other
equipment covered by the Purchase Order or Release Order, line
item prices and total price, delivery and any other such
information, all in accordance with the provisions of this
Agreement.
4.4 All Release Orders shall specify whether Seller is to (a) furnish
the Equipment without engineering or installation Services
("FO Orders"), (b) furnish the Equipment with engineering services
only ("E&F Orders"), or (c) furnish the Equipment with engineering
and installation Services ("EF&I Orders"). With respect to E&F
Orders and EF&I Orders, the specific engineering and/or installation
Services to be performed by Seller shall be as more fully described in
the applicable Release Order.
4.5 All Release Orders issued hereunder by Buyer and its Affiliates are
subject to written acceptance by Seller within fifteen (15) days
from Seller's receipt of a Release Order. If a Release Order is not
so accepted within such fifteen (15) day period, such Release Order
shall be deemed to be not accepted and neither Buyer, its Affiliates
or Seller shall have any further obligation with respect thereto
except for Buyer's obligation to fulfill the requirements of the
Total Commitment. If a Release Order is received from an Affiliate,
the Release Order shall contain the Buyer's express written
authorization.
4.6 Buyer absolutely, irrevocably and unconditionally guarantees the
performance under any Release Order placed by any of its Affiliates
and the contract created thereby and hereby accepts all such liability
with respect to a breach of Affiliates' obligations under such Release
Order.
4.7 Any requested change to a Release Order initiated by Buyer or its
Affiliates, after Seller's acceptance of the Release Order, and any
resulting adjustments to prices, schedule and/or other requirements of
the Release Order shall be mutually agreed upon and subsequently detailed
in a written change to the Release Order ("Change Order"), referencing the
affected Release Order and executed by authorized representatives of Buyer
and Seller. Any adjustment to the prices for Equipment and charges for any
Services, as applicable, in a Change Order shall be based on those
Equipment prices set forth in Exhibit A and Seller's then current charges
for Services. In the event that the Change Order affects work already
performed, the adjustment of the Release Order price shall include
reasonable charges incurred by Seller related to such work. Seller shall at
Buyer's or its
<PAGE>
CONTRACT NO. IFN9301C
PAGE 3 OF 3
Affiliates' request, substantiate such costs. No such changes shall be
performed until a Change Order has been executed by Seller and Buyer
or its Affiliates as described above.
8. PAYMENT
8.1 Seller shall invoice Buyer or its Affiliates upon shipment of the
Equipment and Buyer or its Affiliates shall pay to Seller the price of
each shipment of Equipment (including any freight and/or insurance
prepaid by Seller) within thirty (30) days from the date of invoice.
Charges for Services rendered hereunder shall be invoiced at the
completion of such Services, and paid by Buyer within thirty (30) days
from the date of Seller's invoice therefor. Buyer hereby expressly
waives any other diligence, demand, protest or any notice of any kind
whatsoever as well as any requirement that Seller exhaust any remedy
or right against such Affiliate.
8.2 Overdue payments may, at Seller's sole discretion, be subject to
interest charges, calculated daily from the due date, at one and one
half percent (1 1/2%) per month or such lesser rate as may be the
maximum permissible rate under applicable law.
<PAGE>
EXHIBIT 10.5
Contract No. IFN9301C
Amendment No. 2
Page 1 of 2
AMENDMENT NO. 2
TO
THE SUPPLY AGREEMENT
FOR
TRANSMISSION EQUIPMENT
BETWEEN
INTERSTATE FIBERNET, INC.
AND
NORTHERN TELECOM INC.
This Amendment No. 2 to the Supply Agreement for Transmission Equipment between
Interstate Fibernet, Inc. and Northern Telecom Inc., Contract No. IFN9301C ("the
Agreement"), shall be effective on the date last signed.
All Capitalized terms which are defined in the Agreement shall have the same
meaning in this Amendment No. 2 as in the Agreement.
WHEREAS, Buyer and Seller wish to make certain changes to the Agreement,
NOW Therefore, the Agreement is hereby modified as follows:
1. Section 2, "Term" is hereby amended to be effective through December 31,
1996.
2. In Amendment No. 1, Section 4, the "Total Commitment" is hereby increased
from Five Million Dollars ($5,000,000) to Ten Million Dollars
($10,000,000).
3. Section 28, "Software Maintenance Services" attached hereto is hereby
added to the Agreement.
4. The pricing set forth in the existing Exhibit A, Section 1 shall remain in
full force and effect until Buyer pays Seller Five Million Dollars
($5,000,000) of the Total Commitment as set forth in Section 4.
Thereafter and until the end of the Term, the pricing set forth in
Amendment No. 2, Exhibit A, Section 1 attached hereto shall be in effect.
All other terms and conditions shall remain unchanged and in full force and
effect.
<PAGE>
Contract No. IFN9301C
Amendment No. 2
Page 1 of 2
28. SOFTWARE MAINTENANCE SERVICES
28.1 Exhibit A, Section 1, contains Seller's current Equipment Release and
an associated Custom Software Feature Set Package for which Seller
shall provide Software Maintenance Services. All features included in
such Custom Software Feature Set Package ordered and paid for by
Buyer shall be licensed for use on each network element ("NE") within
Buyer's networks. Other individual features will be offered on an
optional basis at mutually agreed to prices. Optional individual
features may require that Buyer purchase additional hardware.
28.2 Seller shall provide at no cost to Buyer a copy of all applicable
Equipment specific Software Release issued by Seller during the first
twelve (12) month period following the execution of this Agreement.
Beginning with the first anniversary of this Agreement, upon Seller's
issuance of an invoice and Buyer's payment for the Software
Maintenance Services set forth herein, Seller shall provide Buyer a
copy of all applicable Equipment specific Software Release issued by
Seller during the subsequent twelve (12) months. The one (1) year
maintenance term shall renew automatically for additional one (1)
year terms through the second year of this Agreement, unless Buyer
terminates this maintenance by giving Seller thirty (30) days written
notice of termination prior to the termination of the initial one (1)
year maintenance term or any renewal term. Not more than ninety (90)
days nor less than sixty (60) days prior to the end of the initial
one (1) year maintenance term and any renewal term, Seller shall
notify Buyer of the date on which maintenance will renew
automatically.
28.3 Each digital audio tape Software Release shall contain Software loads
required to make the Equipment operational and all then currently
available features and functions. Buyer shall use only those features
in the Custom Software Feature Set Package and any other available
features for which Buyer has paid the respective license fees. Each
Equipment Release shall be supported by the associated Northern
Telecom Practice documentation package ("NTP") which shall include a
section on Software Feature Description. New Software Releases will
be introduced via Seller's established Product Change Notice ("PCN")
routine. At lease sixty (60) days prior to field introduction,
notification of these changes will be provided to Buyer by Seller in
writing.
<PAGE>
Contract No. IFN9301C
Amendment No. 2
Page 2 of 2
28.4 Software updates can be performed in-service on the system without site
visits. The policy for compatibility over time is that a single step in-
service update will be supported for all Equipment Releases with no more
than (2) interim Equipment Releases. Upgrading a system to the most recent
Equipment Release beyond the two (2) year window may involve an
intermediate step (i.e., upgrading the system to an intermediate Equipment
Release).
28.5 Additional Software Maintenance Services shall include the following:
a) Telephone consultation relative to the use and trouble-shooting of
the Software;
b) Notification of Buyer of the existence of coding errors, bugs and
other problems in the Software promptly after the same first become
known to Seller; and
c) Use of best efforts to correct any coding errors, bugs and other
problems in the Software brought to Seller's attention by Buyer or
any other source.
28.6 Notwithstanding the above, Seller agrees to provide the DS-O Grooming
feature to Buyer at no additional cost, when it becomes commercially
available.
28.7 Seller shall provide the above Software Maintenance Services for a fee of
Seven Hundred Ninety-Five Dollars ($795.00) per node, per twelve (12)
months. Notwithstanding the above, in no event shall Buyer's annual cost
for Software Maintenance Services exceed Ninety Five Thousand Dollars
($95,000).
<PAGE>
Contract No. IFN9301C
Amendment No. 2
Page 2 of 2
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year last written below.
INTERSTATE FIBERNET, INC. NORTHERN TELECOM INC.
By: /s/ Steven D. Moses By: /s/ R. Sherwood Robins
---------------------------------- ------------------------------------
(Signature) (Signature)
Name: Steven D. Moses Name: R. Sherwood Robins
-------------------------------- ----------------------------------
(Print) (Print)
Title: General Manager Title: Vice President, Sales Operations
------------------------------- ---------------------------------
Date: 12/31/93 Date: 1/19/94
-------------------------------- ----------------------------------
<PAGE>
Exhibit 10.6
Contract No. IFN9301C
Amendment No. 6
Page 1 of 1
AMENDMENT NO. 6
TO
THE SUPPLY AGREEMENT
FOR
TRANSMISSION PRODUCTS
BETWEEN
INTERSTATE FIBERNET, INC.
AND NORTHERN TELECOM INC.
This is Amendment No. 6 to the Supply Agreement for Transmission Equipment
between Interstate Fibernet, Inc. ("Buyer") and Northern Telecom Inc.,
("Seller"), Contract No. IFN9301C ("Agreement") and shall be effective on the
date last signed.
All Capitalized terms which are defined in the Agreement shall have the same
meaning in this Amendment No. 6.
WHEREAS, the parties have agreed to modify the Agreement to add one (1)
Affiliate to Exhibit E;
WHEREAS, Amendment No. 3 and Amendment No. 4 to the Agreement shall have no
force and effect after the execution of this Amendment.
NOW therefore, the Agreement is hereby modified as follows:
The existing Exhibit E is hereby deleted in its entirety and replaced with
Exhibit E, Amendment No. 6, attached hereto.
All other terms and conditions shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment on the
day and year last written below.
<TABLE>
<CAPTION>
INTERSTATE FIBERNET, INC. NORTHERN TELECOM INC.
<S> <C>
By: /s/ Steven D. Moses By: /s/ Brian D. White
----------------------------- ------------------------------
Signature Signature
Name: Steven D. Moses Name: Brian D. White
--------------------------- ----------------------------
Print Print
Title: VP/COO Title: V.P. Carrier Networks
-------------------------- ---------------------------
Date: 11-15-96 Date: 11/21/96
--------------------------- ----------------------------
</TABLE>
<PAGE>
Affiliates Contract No. IFN9301C
Amendment No. 6
Exhibit E
Page 1 of 1
<TABLE>
<S> <C>
Alabama Power Company South Carolina Electric & Gas
600 North 18th Street 1426 Main Street
Birmingham, AL 35291 Columbia, SC 29201
Georgia Power Company Southern Company Services, Inc.
270 Peachtree Street 800 Shades Creek Parkway
Atlanta, GA 30303 Birmingham, AL 35202-2625
Gulf Power Company Southern Interexchange Facilities
500 Bayfront Parkway 113 South Main Street
Pensacola, FL 32501 Arab, AL 35016
INTERCEL, INC. ValleyNet
206 West 9th Street P.O. Box 174
West Point, GA 31833 Daleville, VA 34083
Mississippi Power Company Virginia Metrotel
2992 West Beach Boulevard P.O. Box 174
Gulfport, MS 39502-4079 Daleville, VA 34083
MPX Systems Gulf States FiberNet
440 Knox Abbott Drive 910 First Avenue
Suite 240 P.O. Box 510
Cayce, SC 29033 West Point, GA 31833
Palmetto Net, Inc. DukeNet Communications, Inc.
P.O. Box 228 526 South Church Street
Rock Hill, SC 29731 Charlotte, NC 28201-1006
R&B Telephone Fiber South, Inc.
P.O. Box 174 5000 Falls of the Neuse Road
Daleville, VA 34083 Raleigh, NC 27609
Savannah Electric and Power Company BTI
3100 Kilowatt Drive 5000 Falls of the Neuse Road
Savannah, GA 31402 Raleigh, NC 27609
SCANA Duke Power Company
1426 Main Street 526 S. Church Street
Columbia, SC 29201 Charlotte, NC 28201
Southern Telecom 1, Inc.
600 18th Street
Birmingham, AL 35291
</TABLE>
<PAGE>
Exhibit 10.7
Contract No. IFN9301C
Amendment No. 7
Page 1 of 5
AMENDMENT NO. 7
TO
THE SUPPLY AGREEMENT
FOR
TRANSMISSION PRODUCTS
BETWEEN
INTERSTATE FIBERNET, INC.
AND NORTHERN TELECOM INC.
This is Amendment No. 7 to the Supply Agreement for Transmission Equipment
between Interstate Fibernet, Inc. ("Buyer") and Northern Telecom Inc.,
("Seller"), Contract No. IFN9301C ("Agreement") and shall be effective on the
date last signed.
All Capitalized terms which are defined in the Agreement shall have the same
meaning in this Amendment No. 7.
WHEREAS, the previous commitments ("Previous Commitments") set forth in the
Agreement and Amendments No. 1, 2, and 5 have been satisfied and Buyer is
willing to enter into a new commitment for Equipment and Software in
consideration of the pricing and other incentives set forth herein.
WHEREAS, the parties have agreed to modify the Agreement as follows:
NOW therefore, the Agreement is hereby modified as follows:
1. Section 2, "Term", is hereby amended to be effective through December 31,
2001.
2. The parties have agreed to establish a new Total Commitment replacing the
Previous Commitments. Therefore, Buyer hereby agrees to purchase Twenty
Five Million Dollars ($25,000,000) of Equipment and/or Software or Buyer
hereby agrees to purchase all SONET OC-48 and higher bandwidth Equipment,
including Dense WDM/Optical Amplifiers from Seller, during the Term of this
Amendment No. 7, whichever comes first. Such Total Commitment shall apply
to purchases of Equipment and licensing of Software between the effective
date of this Amendment No. 7 and the end of the Term of the Agreement. If
during the Term of the Agreement, Buyer is unable to satisfy the Total
Commitment set forth herein, Seller shall invoice Buyer, at the end of the
Term, an amount equal to three (3%) of the difference between the actual
amount of Equipment purchased and Software Licensing fees and the Total
Commitment from the effective date of this Amendment No. 7 ("Invoice
Value").
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Page 2 of 5
Buyer also agrees to increase the capacity of rings one (1) and two (2)
("Rings 1 and 2") to twelve (12) channels of capacity before deploying
another vendor's OC-48 or higher bandwidth SONET product along the same
routes. The aforementioned obligation to increase the capacity shall
exceed the Term of the Agreement.
3. Section 13.1, "Warranty" is hereby deleted in its entirety and replaced as
follows:
13.1 In those instances when Seller does not perform installation Services,
Seller warrants to Buyer, or its Affiliate as appropriate, that
Equipment supplied hereunder, excluding Software, will, under normal
use and service, be free from defective material and faulty
workmanship and will perform in accordance with the applicable
Specifications for a period of sixty (60) months from the date of
shipment, or if the date of shipment is not marked on the Equipment,
sixty-three (63) months from the date of manufacture. In the event
Seller performs installation Services, the Equipment warranty shall be
sixty (60) months from the date of acceptance as set forth in Section
12. This warranty does not apply to items normally consumed in
operation, such as, but not limited to, lamps and fuses. Seller
further warrants that any engineering and installation Services
performed by Seller will be free from defects in workmanship for the
duration of the Equipment warranty period. Seller's sole obligation
and Buyer's exclusive remedy under this warranty are limited to the
replacement or repair, at Seller's option and expense, of the
defective Equipment, or correction of the defective engineering and
installation Services. Such obligation and remedy are conditional upon
the Equipment not having been altered or repaired by any party other
than Seller without Seller's prior written consent, and the defect not
being the result of Buyer's mishandling, abuse, misuse or improper
storage, installation, operation, or maintenance, or other causes not
imputable to Seller and upon the Equipment not having been damaged by
fire, explosion, power failure, lightning, or any other act of nature
or public enemy. The repair or replacement of the defective Equipment
and the correction of defective engineering and installation Services
shall be warranted for a period of ninety (90) days or the remainder
of the original Equipment warranty period whichever is longer.
4. The following Exhibits are hereby deleted in there entirety and replaced
with Amendment No. 7 of the applicable Exhibit and are attached hereto:
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Page 3 of 5
Exhibit A, "Cover Page"
Exhibit A, "Equipment and Prices"
Exhibit B, "Delivery Intervals"
Exhibit E, "Affiliates".
5. The following Exhibits are hereby added and are attached hereto:
Exhibit F, Amendment No. 7, "Network Manager"
Exhibit G, Amendment No. 7, "Cover Page"
Exhibit G, Section 1, Amendment No. 7, "Installation and Test Services"
Exhibit G, Section 2, Amendment No. 7, "Services Scope of Work"
Exhibit H, Amendment No. 7, "Dedicated Engineer"
Exhibit I, Amendment No. 7, "Cover Page"
Exhibit I, Sections 1 through 3, Amendment No. 7, "Replacement Equipment"
Exhibit J, Amendment No. 7, "Cover Page"
Exhibit J, Sections 1 through 7, Amendment No. 7, "Georgia/Florida Ring
Project"
13. Section 29, "Total Commitment Incentives", is hereby added as follows:
TOTAL COMMITMENT INCENTIVES
29. In consideration of Buyer making the Total Commitment, and awarding
Seller with its DWDM Georgia/Florida ring project ("Georgia/Florida
Ring Project"), Seller shall provide to Buyer, at no charge to Buyer,
the following incentives:
29.1 Seller's Network Manager Software and the associated
workstations, as set forth in Exhibit F, Amendment No. 7,
"Network Manager"; and
29.2 During the Term, as set forth in Exhibit G, Section 1, Amendment
No. 7, "Installation and Test Services", Seller shall provide
Buyer installation and test Services for all projects Buyer
awards to Seller that utilizes only Seller's SONET TransportNode
Equipment; and
29.3 During the Term, Seller shall provide one (1) Systems Engineer
to aid Buyer with SONET TransportNode projects and activities
involving Seller. Such Systems Engineer shall be located at
Seller's facility. Such System Engineer shall be responsible for
implementing SONET TransportNode projects between the parties per
the guidelines set forth in Exhibit H, Amendment No. 7; and
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Page 4 of 5
29.4 During the Term, Seller shall provide Buyer, excluding Buyer's
Affiliates, two (2) SONET internship seats in Montreal, Quebec
and five (5) seats of Seller's standard training as set forth in
Seller's course curriculum. Such standard training shall not
exceeding five (5) days and shall be located at one (1) of
Seller's training facilities. Upon Buyer's request, Seller shall
schedule Buyer for such standard training. Notwithstanding the
foregoing, Buyer shall be responsible for all travel and living
expenses associated with such training.
29.5 For the Georgia/Florida Ring Project only, Seller shall provide
Buyer four (4) sets of spare plug-ins, as set forth in Exhibit J,
Sections 4, 5, 6, and 7. Such spares shall be provided to Buyer
upon the deployment of the initial DWDM GA/FL Ring 1 and 2 build
with the following provisions:
29.5.1 Four (4) sets of DWDM optics shall be provided for those
wavelengths specifically required for the initial build of
channels 1 and 2. Four sets of DWDM optics spares shall be
provided as each new channel and new wavelength are added;
and
29.5.2 One (1) set of HPTX optics are to be provided for the ring
3 build as ring 3 is limited to a single S/DMS
TransportNode OC-48 channel.
29.6 Seller shall replace the Lucent and/or NEC networks, identified.
Such replacement Equipment shall be new. Seller's
responsibilities associated with such Equipment and
identification of such Lucent and/or NEC networks shall be as set
form in Exhibit I, Sections 1 through 3, Amendment No. 7,
"Replacement Equipment", with Seller's S/DMS TransportNode OC-48
Equipment. Upon Buyer's acceptance of Seller's systems, Buyer
shall pass title of such Lucent and/or NEC equipment to Seller.
14. Section 30, Affiliates Bartering, is hereby added as follows:
30.1 On a case by case basis, Buyer may notify Seller, in writing, of
Buyer's desire to transfer Seller's TransportNode Equipment and
Software to any of its business affiliates ("Affiliate Bartering").
Seller shall provide Buyer with Seller's written consent for such
transfer, such consent not to be unreasonably withheld.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Page 5 of 5
Notwithstanding the foregoing, such Affiliate must agree, in writing,
to be bound by the terms and conditions of the Software License as
agreed to between Buyer and Seller.
30.2 In the event that such Affiliate Bartering involves used Equipment,
then any existing warranties for such Equipment shall expire upon such
transfer of ownership of such Equipment. Notwithstanding the
foregoing, Equipment associated with the Georgia/Florida Ring Project
shall not be eligible for such Affiliate Bartering.
All other terms and conditions shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment on the
day and year last written below.
INTERSTATE FIBERNET, INC. NORTHERN TELECOM INC.
By: /s/ Doug Shumate By: /s/ Brian D. White
---------------------------- ------------------------------
Signature Signature
Name: Doug Shumate Name: Brian D. White
--------------------- ----------------------------
Print Print
Title: Snr VP & CFO Title: V.P. Broad Band Sales
-------------------- ---------------------------
Date: 4-15-97 Date: 4/15/97
--------------------- ----------------------------
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit A
Page 1 of 1
PRODUCTS, PRICES, AND FEES
SECTION PRODUCT
1 S/DMS TransportNode OC-3/12/48
2 S/DMS TransportNode OC-192
3 Discount Matrix
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit A
Section 1
Page 1 of 5
S/DMS TransportNode Equipment (OC-3/12/48)
<TABLE>
<CAPTION>
CONTRACT
NTI CODE CPC CODE DESCRIPTION NET PRICE
- -------- -------- ----------- ---------
<S> <C> <C> <C>
B0105001 B0105001 Frame, One OC-48 Terminal Shelf, Front Access $8,816
B0105002 B0105002 Frame, Two OC-48 Terminal Shelves, Rear Access $16,418
B0105003 B0105003 Frame, One OC-48 Terminal Shelf, Top, Rear Access $8,816
B0105004 B0105004 Frame, One OC-48 Terminal Shelf, Bottom, Rear Access $8,816
B0105005 B0105005 Frame, One OC-48 Regen Shelf $3,898
B0105006 B0105006 Frame, Two OC-48 Regen Shelves $6,610
B0105007 B0105007 Frame, Three OC-48 Regen Shelves $9,322
B0105010 B0105010 Frame, One OC-12 TBM Shelf, Position 1 $4,648
B0105011 B0105011 Frame, One OC-12 TBM Shelf, Position 2 $4,691
B0105012 B0105012 Frame, Two OC-12 TBM Shelves $7,472
B0105013 B0105013 Frame, Three OC-12 TBM Shelves $10,253
B0105014 B0105014 Frame, One OC-12 TBM Shelf, Position1, VTBM $4,648
B0105015 B0105015 Frame, One OC-12 TBM Shelf, Position2, VTBM $4,691
B0105016 B0105016 Frame, Two OC-12 TBM Shelves, VTBM $7,472
B0105017 B0105017 Frame, Three OC- 12 TBM Shelves, VTBM $10,253
NT4K19AB A0624160 OC-12 Shelf TBM $3,135
NT4K30AA A0389285 OC-12 - DS-3/STS-1 I/O (1) $247
NT4K32AA A0389518 OC-12 - DS-1 I/O (14 In) $214
NT4K33AA A0389519 OC-12 - DS-1 I/O (14 Out) $214
NT4K52BC A0408684 OC-12 Control - Shelf Processor $1,232
NT4K53AB A0399607 OC-12 Control - Maintenance $419
NT4K60CA A0407135 OC-12 Protection - 12 DS-3 Switcher $254
NT7E01CB A0398143 OC-3 LR 1S10 Networking Interface (FC) $3,092
NT7E01CC A0398144 OC-3 LR 1310 Networking Interface (ST) $3,092
NT7E0lCD A0398145 OC-3 LR 1310 Networking Interface (SC) $3,092
NT7E01DB A0398147 OC-3 IR 1310 Networking Interface (FC) $2,807
NT7E01DC A0398148 OC-3 IR 1310 Networking Interface (ST) $2,807
NT7E01DD A0398149 OC-3 IR 1310 Networking Interface (SC) $2,807
NT7E02EB A0392278 OC-12 LR 1310 BLSR RING Interface (FC) $5,728
NT7E02EC A0392279 OC-12 LR 1310 BLSR RING Interface (ST) $5,728
NT7E02ED A0392280 OC-12 LR 1310 BLSR RING Interface (SC) $5,728
NT7E02ED A0392280 OC-12/48 Interface - OC-12 LR 1310 (SC) $5,728
NT7E02FB A0392284 OC-12 IR 1310 BLSR RING Interface (FC) $4,987
NT7E02FC A0392285 OC-12 IR 1310 BLSR RING Interface (ST) $4,987
NT7E02FD A0398326 OC-12 IR 1310 BLSR RING Interface (SC) $4,987
NT7E02JB A0397458 OC-12 ELR 1550 Ring Interface (FC) $7,447
NT7E02JC A0397459 OC-12 ELR 1550 Ring Interface (ST) $7,447
NT7E02JD A0397460 OC-12 ELR 1550 Ring Interface (SC) $7,447
NT7E04CA A0357486 OC-12 DS-1 Mapper (14) $2,266
NT7E05AB A0620890 OC-12 VTBM Optics, LR, (FC) $9,576
NT7E05AC A0620891 OC-12 VTBM Optics, LR, (ST) $9,576
NT7E05AD A0620892 OC-12 VTBM Optics, LR, (SC) $9,576
NT7E05BB A0620893 OC-12 VTBM Optics, IR, (FC) $8,265
</TABLE>
Note: Unbolded entries are to be discounted an additional 7%. Bolded entries are
---
not to be discounted!
- --- -- -- ----------
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit A
Section 1
Page 2 of 5
<TABLE>
<CAPTION>
CONTRACT
NTI CODE CPC CODE DESCRIPTION NET PRICE
- -------- -------- ----------- ---------
<S> <C> <C> <C>
NT7E05BC A0620895 OC-12 VTBM Optics, IR, (ST) $8,265
NT7E05BD A0620896 OC-12 VTBM Optics, IR, (SC) $8,265
NT7E08AA A0341503 OC-12/48 - DS-3 Mapper (3) $2,639
NT7E09AA A0341504 OC-12/48 - STS-1 Mapper (3) $2,779
NT7E14AA A0341509 OC-48 - DS-3/STS-1 I/O (1) $119
NT7E19AA A0360167 OC-12/48 Control - ESI Carrier $220
NT7E20CC A0395434 OC-48 Control - Shelf Processor $842
NT7E20GB A0634730 OC-48 Control - Enhanced Shelf Processor $2,451
NT7E23AA A0341514 OC-48 Control - Maintenance $367
NT7E24BC A0399043 OPC w/Tape Drive $4,788
NT7E24CC A0399044 Portable Operations Controller (OPC) $7,803
NT7E24TA A0379851 Blank DAT Tape (Spare ONLY.) $78
NT7E25BA A0362991 OC-48 Interface - Orderwire $1,319
NT7E26AA A0341517 OC-48 Interface - 64Kb/s Data Channel $1,394
NT7E27BA A0623147 OC-12/48 Control - Synchronization $1,223
NT7E33DA A0408535 OC-12/48 Interface - STS-12 $2,038
NT7E35AA A0402556 OC-12 Protection - Ring Loopback $883
NT7E36AA A0402558 OC-12 Protection - Ring Overhead Bridge $242
NT7E82DA A0628317 OC-12/48 Release Upgrade $1,036
NT7E85JA A0622129 OC-12 Load - Release 9.0 $103
NT7E85KA A0636948 OC-12 Load - Release 10.0 $103
NT7E85LA A0638726 OC-12 Load - Release 11.0 $103
NT8E01CQ A0626892 OC-48 Interface - OC-48 1533 Term Tx (FC) $20,124
NT8E01CR A0626893 OC-48 Interface - OC-48 1533 Term Tx (ST) $17,609
NT8E01CS A0626894 OC-48 Interface - OC-48 1533 Term Tx (SC) $17,609
NT8E01MF A0626670 OC-48 Interface - OC-48 1310 Term Tx (FC) $12,255
NT8E01MG A0626672 OC-48 Interface - OC-48 1310 Term Tx (ST) $12,255
NT8E01MH A0626671 OC-48 Interface - OC-48 1310 Term Tx (SC) $12,255
NT8E01NF A0626673 OC-48 Interface - OC-48 1557 Term Tx (FC) $16,770
NT8E01NG A0626674 OC-48 Interface - OC-48 1557 Term Tx (ST) $16,770
NT8E01NH A0626675 OC-48 Interface - OC-48 1557 Term Tx (SC) $16,770
NT8E01PB A0617854 OC-48 Interface - OC-48 1310 Ring Tx (FC) $13,623
NT8E01PC A0617855 OC-48 Interface - OC-48 1310 Ring Tx (ST) $13,623
NT8E01PD A0617923 OC-48 Interface - OC-48 1310 Ring Tx (SC) $13,623
NT8E01QB A0617856 OC-48 Interface - OC-48 1557 Ring Tx (FC) $18,648
NT8E01QC A0617857 OC-48 Interface - OC-48 1557 Ring Tx (ST) $18,648
NT8E01QD A0617858 OC-48 Interface - OC-48 1557 Ring Tx (SC) $18,648
NT8E02DB A0392289 OC-48 Interface - OC-48 Rx (FC) $9,547
NT8E02DB A0392289 OC-48 Interface - OC-48 Rx (FC) $9,547
NT8E02DC A0392290 OC-48 Interface - OC-48 Rx (ST) $9,547
NT8E02DC A0392290 OC-48 Interface - OC-48 Rx (ST) $9,.547
NT8E02DD A0398312 OC-48 Interface - OC-48 Rx (SC) $9,547
NT8E02DD A0398312 OC-48 Interface - OC-48 Rx (SC) $9,547
NT8E03AB A0363887 OC-48 Interface - OC-48 1310 Regen Tx (FC) $13,555
</TABLE>
Note: Unbolded entries are to be discounted an additional 7%. Bolded entries are
---
not to be discounted!
- --- -- -- ----------
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit A
Section 1
Page 3 of 5
<TABLE>
<S> <C> <C> <C>
NT8E03AC A0366644 OC-48 Interface - OC-48 1310 Regen Tx (ST) $13,555
NT8E03AD A0398211 OC-48 Interface - OC-48 1310 Regen Tx (SC) $13,555
NT8E03CB A0371103 OC-48 Interface - OC-48 1557 Regen Tx (FC) $18,550
NT8E03CC A0371105 OC-48 Interface - OC-48 1557 Regen Tx (ST) $18,550
NT8E03CD A0398313 OC-48 Interface - OC-48 1557 Regen Tx (SC) $18,550
NT8E03CM A0406377 OC-48 Interface - OC-48 1533 Regen Tx (FC) $19,478
NT8E03CN A0406378 OC-48 Interface - OC-48 1533 Regen Tx (ST) $19,478
NT8E03CP A0406379 OC-48 Interface - OC-48 1533 Regen Tx (SC) $19,478
NT8E04AB A0405411 Optical Line/ Post Amp (FC) $29,975
NT8E04AC A0405418 Optical Line/ Post Amp (ST) $34,171
NT8E04AD A0405419 Optical Line/ Post Amp (SC) $34,171
NT8E04BB A0636631 Bi-Directional WDM Opt. Amp (FC) $45,597
NT8E04BC A0636632 Bi-Directional WDM Opt. Amp (ST) $45,597
NT8E04BD A0636633 Bi-Directional WDM Opt. Amp (SC) $45,597
NT8E05C8 A0399468 OC-48 Demux - Terminal $4,871
NT8E06AA A0348539 OC-48 Demux - Ring $4,871
NT8E15AA A0348546 OC-48 Protection - 24 DS-3/STS-1 Switcher $703
NT8E17AA A0348547 OC-48 - DS-3/STS-1 I/O Carrier (6) $316
NT8E18AC A0402178 OC-48 Protection - 48 DS-3/STS-1 Switch Controller $1,055
NT8E31BA A0399924 OC-48 Interface - STS-48 Ring Tx $3,768
NT8E31BA A0399924 OC-48 Interface - STS-48 Ring Tx $3.768
NT8E31CA A0615263 OC-48 Interface - STS-48 Term Tx $3.768
NT8E31EA A0626712 OC-48 Interface - STS-48 Tx (For HPTX) $3,768
NT8E31EA A0626712 OC-48 Interface - STS-48 Term Tx (For HPTX) $3,768
NT8E32AA A0371110 OC-48 Interface - STS-48 Rx $3,642
NT8E32AA A0371110 OC-48 Interface - STS-48 Rx $3,642
NT8E34AB A0408524 OC-48 Interface - 1557 HPTX (FC) $44,975
NT8E34AB A0408524 OC-48 Interface - 1557 HPTX (FC) $44,975
NT8E34AC A0408525 OC-48 Interface - 1557 HPTX (ST) $44,975
NT8E34AC A0408525 OC-48 interface - 1557 HPTX (ST) $44,975
NT8E34AD A0408526 OC-48 Interface - 1557 HPTX (SC) $44,975
NT8E34AD A0408526 OC-48 Interface - 1557 HPTX (SC) $44,975
NT8E34BB A0408527 OC-48 Interface - 1533 HPTX (FC) $47,223
NT8E34BB A0408527 OC-48 Interface - 1533 HPTX (FC) $47,223
NT8E34BC A0408529 OC-48 Interface - 1533 HPTX (ST) $47,223
NT8E34BC A0408529 OC-48 Interface - 1533 HPTX (ST) $47,223
NT8E34BD A0408530 OC-48 Interface - 1533 HPTX (SC) $47,223
NT8E34BD A0408530 OC-48 Interface - 1533 HPTX (SC) $47,223
NT8E50AA A0348549 OC-48 Shelf - Terminal $7,117
NT8E51AB A0625770 OC-48 Regen/Opt. Amp Shelf $2,639
NT8E51AB A0625770 OC-48 Regen/Opt. Amp Shelf $2,639
NT8E85GB A0634961 OC-48 Release 10.10 $103
NT8E85HA A0632887 OC-48 Release 11.03 $103
NT8E85KA A0647239 OC-48 Release 13.0 $103
</TABLE>
Note: Unbolded entries are to be discounted an additional 7%. Bolded entries are
---
not to be discounted!
- --- -- -- ----------
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit A
Section 1
Page 4 of 5
RIGHT-TO-USE LICENSES FOR SOFTWARE (PER SHELF)
<TABLE>
<S> <C> <C> <C>
NT7E80AC A0393738 OC 3/12 SONET DCC Bridge $2,750
NT7E80AV A0647771 OC-12 TRIBUTARY - OC-3/3C $1,748
NT7E80DA A0402699 OC-12 Advanced OAM&P (Terminal) $3,723
NT7E80DC A0402701 OC-12 Advanced ADM $3,723
NT7E80DD A0402702 OC-12 Advanced Ring $6,223
NT7E80DF A0628328 OC-12 HUB DCC PASS THROUGH $3,417
NT7E80DJ A0634956 OC-12 FEATURE - VT TSA $4,557
NT7E80DL A0637065 OC-12 MATCHED NODES $5,697
NT7E80FA A0402697 OC-3 Advanced OAM&P (Terminal) $1,852
NT7E80FC A0402698 OC-3 Advanced ADM $2,565
NT7E82AC A0393748 OC-12 DS-3 Performance Monitoring Included
NT7E82AE A0396496 OC-12 DS1 Performance Monitoring Included
NT7E82AH A0393752 OC-12 TL-1/NMA Application Included
NT7E82AK A0647765 PRIMARY OPC INTERFACE TL-1/NMA Included
NT7E82BC A0396497 OC-3 DS-3 Performance Monitoring Included
NT7E82BE A0402715 OC-3 DS-1 Performance Monitoring Included
NT7E82BH A0396500 OC-3 TL-1/NMA Application Included
NT7E82CH A0647908 OC-12/48 INTERFACE - OSI $2,073
NT7E82CK A0647882 PRIMARY OPC IF/F OSI $1,036
NT7E82DA A0628317 OC-3/12/48 N-2 Release Upgrade $1,036
NT7E82DB A0628318 OC-3/12/48 Event History Included
NT7E82DC A0628319 OC-3/12/48 Remote Inventory Included
NT7E82DF A0628322 OC-12/48 I/F - Serial Telem Included
NT7E82DG A0628323 OC COMM PARALLEL I/F PORT LICENSE $1,776
NT7E83AA A0392172 OPC Redundancy Included
NT7E83AB A0392173 OPC Application s/w (Formally IFN OPC Features NT7E83IF) per OPC
charge $3,700
NT7E83AC A0393740 Standby TL-1/NMA Included
NT8E80DA A0402713 OC-48 Advanced OAM&P (Terminal) $11,623
NT8E80AS A0402165 OC-48 Extra Traffic $5,201
NT8E80AV A0647763 OC 48 Trib-OC-3/3c (for Trib) $1,748
NT8E80AW A0647766 OC-48 TRIB. OC12/12C S/W (Per Trib) $3,250
NT8E80AY A0647767 OC-48 TRIB. STS-12/12C S/W (Per Trib) $3,250
NT8E80DD A0390657 OC-48 Advanced Ring System $14,123
NT8E80DL A0628312 OC-48 Matched Nodes (TA-1230) $24,520
NT8E80DP A0634957 OC-48 Feature - Multi D&C (BLSR) $7,122
NT8E80DQ A0634958 OC-48 Feature - BLSR Ex Traffic $9,687
NT8E80DR A0647768 OC-48 Feature-Optical Trib DCC $3,417
NT8E81DA A0402714 OC-48 Regenerator Advanced Application Software $5,940
NT8E81AC A0647769 OC-48 APPL OPTICAL AMP S/W $3,108
NT8E82AC A0392209 OC-48 DS-3 Performance Monitoring (Term) Included
NT8E82AE A0628311 OC-48 STS-1 Performance Monitoring Included
</TABLE>
Note: Unbolded entries are to be discounted an additional 7%. Bolded entries are
---
not to be discounted!
- --- -- -- ----------
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit A
Section 1
Page 5 of 5
<TABLE>
<S> <C> <C> <C>
NT8E82AF A0647770 OC-48 SURV.OC12/STS-12PMS S/W Included
DOCUMENTATION(CD ROM)
NT7E64DF A0631163 OC-12 Practice - Release 10.0 (CD) $220
NT7E64DG A0631166 OC-12 Practice - Release 11.0 (CD) $220
NT8E64AI A0622050 OC-48 Practice - Release 10.0 (CD) $220
NT8E64AJ A0631160 OC-48 Practice - Release 11.0 (CD) $220
NT7E65DF A0631162 OC-3/OC 12 TBM NTPs Rel 10.0 $0
NT7E65DG A0631165 OC-3/OC 12 TBM NTPs Rel 11.1 $339
NT8E65AI A0622048 OC-48 NTP Package REL 10 0 $0
NT8E65AJ A0631161 OC-48 NTP Package REL 11.0 $339
NETWORK MANAGER HARDWARE
NTSE51AA A0629457 Network Manager - HP715 Workstation $25,000
NTSE53AB A0656491 Network Manager - HP-C100 Workstation $37,500
NTSE85EA A0639921 Network Manager Load - Release 5.0 Tape $180
RIGHT-TO-USE LICENSES FOR APPLICATIONS AND FEATURES
NETWORK MANAGER FEATURES
NTSE80EA A0641929 Network Manager Rel. 5 TransportNode RTU $25,000
NTSE82AA A0620131 Network Manager - Surveillance Package $25,000
NTSE82BA A0620132 Network Manager - S/W Management Package $25,000
NTSE82CA A0628386 Network Manager - Centralized PM Displays $25,000
NTSE82DA A0628387 Network Manager - Remote Inventory/Shelf Graphics $25,000
NTSE82EA A0641620 Network Manager - Connection Management Package $25,000
NTSE81AA A0408533 Net Mgr. - TransportNode OPC SOC Connection $5,000
NTSE81AB A0620961 Network Manager - OPC SOC Software Download $3,000
NTSE81AC A0629202 Net. Mgt. - OPC SOC Data Access Connection (PM/Inv.) $3,000
NTSE81AD A0641621 Network Manager - OPC SOC Connection Management $3,000
NTSE81BA A0408534 Network Manager - User Terminal Hookup $3,000
DOCUMENTATION
NTSE65EA A0639922 Network Manager User Guide- Release 5.0 $249
</TABLE>
Note: Unbolded entries are to be discounted an additional 7%. Bolded entries are
---
not to be discounted!
- --- -- -- ----------
<PAGE>
S/DMS TRANSPORTNODE OC-192 Contract No. IFN9301C
Amendment No. 7
CUSTOMER: Interstate FiberNet Exhibit A
DATE: 1/28/97 Section 2
Page 1 of 2
<TABLE>
<CAPTION>
Contract
ITEM PRODUCT DESCRIPTION CODE Net Price
---- ------------------- ---- ---------
<S> <C> <C> <C>
#1.0 OC-192 Bay/Shelf Hardware
Mechanical Bay Assembly (7'0" frame) NTCA89AA 17,288
#2.0 Mandatory Common Equipment
Shelf Controller NTCA41BA 4,356
Maintenance Interface NTCA42M 1,565
Breaker/Filter Module NTCA40AA 348
Message Transfer NTCA48AA 2,607
External Synchronization Interface NTCA44AA 3,911
#3.0 Optional Features - Hardware
Parallel Telemetry Interface NTCA45AA 1,527
Order Wire (Phase 2) NTCA47AA 2,765
#4.0 Line Optics
OC-192 Term Tx (FC)1557nm Negative Chirp NTCA01BA 41,717
OC-192 Term Tx (SC)1557nm Negative Chirp NTCA01BC 41,717
OC-192 Term Tx (FC)1557nm Positive Chirp NTCA01CA 41,717
OC-192 Term Tx (SC)1557nm Positive Chirp NTCA0lCC 41,717
OC-192 Term Tx (FC)1533nm Neg/Pos Chirp NTCA01DA 49,817
OC-192 Term Tx (SC)1533nm Neg/Pos Chirp NTCA01DC 49,817
OC-192 Term Tx (FC)1533nm Positive Chirp NTCA01DD 49,817
OC-192 Term Tx (SC)1533nm Positive Chirp NTCA01DF 49,817
OC-192 Regen Tx (FC)1557nm Negative Chirp NTCA03BA 53,405
OC-192 Regen Tx (SC)1557nm Negative Chirp NTCA03BC 53,405
OC-192 Regen Tx (FC)1557nm Positive Chirp NTCA03CA 53,405
OC-192 Regen Tx (SC)1557nm Positive Chirp NTCA03CC 53,405
OC-192 Regen Tx (FC)1533nm Neg/Pos Chirp NTCA03DA 61,505
OC-192 Regen Tx (SC)1533nm Neg/Pos Chirp NTCA03DC 61,505
OC-192 Regen Tx (FC)1533nm Positive Chirp NTCA03DD 61,505
OC-192 Regen Tx (SC)1533nm Positive Chirp NTCA03DF 61,505
OC-192 Long Reach Receiver (FC),1557nm NTCA02AA 41,717
OC-192 Long Reach Receiver (SC),1557nm NTCA02AC 41,717
OC-192 Long Reach Receiver (FC),1533nm NTCA02CA 41,717
OC-192 Long Reach Receiver (SC),1533nm NTCA02CC 41,717
OC-192 Short Reach Receiver (FC),1557/1533 NTCA02BA 28,368
OC-192 Short Reach Receiver (SC),1557/1533 NTCA02BC 28,368
OC-192 Demultiplexer NTCA05AA 11,779
#5.0 Filler Cards & Carrier Units
Transport Shelf Filler Card (Single Slot) NTCA49AA 338
Switch Module Position Filler Card (Double Slot) NTCA49AB 540
Control Shelf Filler Card (1 inch) NTCA59AA 81
</TABLE>
<PAGE>
S/DMS TRANSPORTNODE OC-192 Contract No. IFN9301C
Amendment No. 7
CUSTOMER: Interstate FiberNet Exhibit A
DATE: 1/28/97 Section 2
Page 2 of 2
<TABLE>
<CAPTION>
Contract
ITEM PRODUCT DESCRIPTION CODE Net Price
---- ------------------- ---- ---------
<S> <C> <C> <C>
#6.0 OC-192 Switch Modules
Main Shelf Switch Module NTCA20AA 17,383
#7.0 OC-192 Mandatory Software - Right to Use
OC-192 Release 1 Software Load NTCA60AA 146
OC-192 Application - 1+1 Terminal NTCA62AA 43,457
OC-192 Application - Regen/Op Amp NTCA62AB 26,074
#8.0 OC-192 Optional Features - Right to Use
OC-192 Feature - Intemediate Path PM NTCA62FA 7,868
OC-192 Feature - Forward Error Correction NTCA62FB 18,252
OC-192 Feature - TL-1 Interface NTCA62BA 4,050
OC-192 Feature - Optical Trib DCC NTCA62FC 11,334
#9.0 Tributaries
OC-48 Tributary T/R (1310, FC) NTCA30BA 24,446
OC-48 Tributary T/R (1310, ST) NTCA30BB 24,446
OC-48 Tributary T/R (1310, SC) NTCA30BC 24,446
STS-48 Coaxial T/R NTCA34AA 11,987
#10.0 Miscellaneous
DCM 060 NTCC14AC 20,250
DCM 080 NTCC14BC 22,950
Dual (Tx/Rx) STS-48 Coaxial Cable Assembly NTCA8931 215
Mult. Shelf LAN Cable (66ft); OC-192 Ml-MI NTCC8927 150
9/25-Pin User VF Modem Access Cable 20m (66ft) NTCC8930 138
Parallel Telemetry input cable asbly 20m (66ft) NTCC8928 174
Parallel Telemetry output cable asbly 20m (66ft) NTCC8929 174
OC-192 NTP REL 01 NTCA65AA 482
OC-192 NE customer drawing package NTCA79MA 65
OC-192 consumable spares kit NTCA79AA 65
Envir ControlL Panel Assy - 3 Fan NTCA85AA 9,335
Fiber Management Hardware Kit NTCC8414 486
Fan Module NTCA85BA 1,985
#11.0 Optical Amps
MOR Amps NTCA11AA 90,000
</TABLE>
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit A
Section 3
Page 1 of 1
<TABLE>
<CAPTION>
Discount Matrix
A B C
------------------ -------------------------------- -------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Commitment OC-3/12 OC-3/12/48 OC-3/l2/48
Level All NT4K Codes All NT7E/8E Codes OC-48 1550 & HPTX Optics
(Except OC-48 1550 & HPTX Optics)
------------------ -------------------------------- -------------------------------------- -----------------------------
Discount Percentage Discount Percentage Discount Percentage
- ------- ------------------ -------------------------------- -------------------------------------- -----------------------------
1 1 Year/$5M 34% 43% 50%
- ------- ------------------ -------------------------------- -------------------------------------- -----------------------------
2 5 Year/$25M 34% 43% 50%
+ 7% Additional Net Discount + 7% Additional Net Discount
- ------- ------------------ -------------------------------- -------------------------------------- -----------------------------
</TABLE>
Notes:
1. The base volume discount has been applied to the Product prices provided in
Schedule A of this Product Attachment for Transmission Products. The
additional NET 7% for the 5 Year/$25M commitment is not reflected in the
Discount Matrix.
<PAGE>
Contract No. IFN9301C
Amendment No.7
Exhibit B
Page 1 of 1
DELIVERY INTERVALS
------------------
The normal intervals from Seller's receipt of an order to shipment of Equipment
are as indicated. Any forecast provided Buyer is to be submitted to Seller at
least twenty (20) weeks prior to the required delivery of Equipment.
Delivery Intervals (Weeks After Receipt of Order)
<TABLE>
<CAPTION>
With Forecast Without Forecast
<S> <C> <C>
OC-3/12 4 12
OC-48 4 12
OC-48 HPTX & DWDM Optics 12 16
MOR Optical Amps 8 12
OC-192 8 12
</TABLE>
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit E
Page 1 of 1
AFFILIATES
CyberNet Inc.
Delta Com, Inc.
Gulf States FiberNet
InterCall
InterCel
Interstate Telephone Company
InterQuest/Eastern Telecom Inc.
Mind Spring Enterprises
Scana Communications Inc.
South Carolina Electric and Gas
Valley Telephone Company
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit F
Page 1 of 2
Network Manager
Seller shall provide Buyer Seller's Network Manager system equipped in the
following configuration:
. Two HP C100 Workstations
. Release 6.01 Network Manager Software
. The ability to interface to all existing Seller OPC Spans of Control
. The ability to interface with all existing Seller SONET Network Elements
(Appox. 120 NE's).
. The ability to interface with all Seller SONET Network Elements to be
deployed in the new Georgia/Florida Ring Project builds.
Buyer will be granted the use of all Network Manager Release 6.01 features with
the following exceptions:
. Virtual Tributary Bandwidth Management (VTBM ) support for OC-12 BLSR rings
on TBM and ABM platforms. - An additional charge of One Thousand Dollars
("$1000") per network element ("NE") will be added for this feature.
. DV-45 fault management - an additional charge of Five Hundred Dollars
("$500") per NE will be added for this feature.
. Tellabs Titan 5500 Digital Cross Connect support - an additional charge of
Two Thousand Dollars ("$2000") per cross connect will be added for this
feature.
. OC-192 support - an additional charge of Two Thousand Dollars ("$2000") per
NE will be added for this feature. Note that this does not include the OC-
192 common Equipment required to house the MOR amps required in the new
Georgia/Florida Ring Project build.
. OC-3 Express support - an additional charge of One Thousand Dollars
("$1000") per NE will be added for this feature.
. AccessNode support - an additional charge of One Thousand Dollars ("$1000")
per NE will be added for this feature.
<PAGE>
Contract No. IFN930lC
Amendment No. 7
Exhibit F
Page 2 of 2
Note that any existing nodes that Buyer wishes to interface, either belonging to
partners or Affiliates or any new nodes not defined above will be subject to the
following charges:
. OC-192 - $2000 per NE
. OC-L8 -$1500 per NE
. OC-3/12 TBM - $1000 per NE
. OC-3 Express - $1000 per NE
. AccessNode - $1000 per NE
Upgrades from one (1)Software release to the next, for example from Network
Manager Release 6.01 to 7.01 will be subject to a flat charge of Twenty Five
Thousand Dollars ("$25,000") per upgrade.
Note that Seller's offer does not include the building of any external LAN/WAN
infrastructure i.e. routers, leased lines ect. The aforementioned items are to
be provided by Buyer.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Page 1 of 1
INSTALLATION AND TEST SERVICES
SECTION HEADING
1 Installation and Testing Services
2 Services Scope of Award
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 1
Page 1 of 1
Installation and Testing Services
Seller shall provide Buyer all installation and test Services of all
Seller/Buyer SONET TransportNode projects. This Service is offered for all
builds consisting of no less than one (1)NE.
The scope of these installation and test Services are defined and are governed
by the Scope of Work set forth in Exhibit G, Section 2. Any installation or
test Services which deviate from such Scope of Work may be performed upon mutual
agreement of the parties and shall be subject to additional negotiated charges.
Buyer must provide a minimum of four (4) weeks notice of the build prior to the
start of any installation. Buyer must supply Seller's installation and test
teams adequate and reasonable time to complete each job required.
Equipment is assumed to be delivered to one (1) of Buyer's controlled
warehouses. Warehousing and transportation of Equipment to Buyer's designated
site is not included but may be provided at an additional charge.
Installation and Engineering hours shall be issued at a rate of One Thousand
("1,000") hours per One Million Dollars ("$1,000,000") in purchases. The hours
can be used as Purchase Orders are issued. Travel and living expenses will be
blended into the hours charged at the rate of one (1) hour per One Hundred
Dollars ("$100") expenses.
Notwithstanding the foregoing, Buyer shall have the option of contracting such
Services out to other providers. For this, a product credit of $XXX/hour can be
redeemed by Buyer.
This provision is provided solely to Buyer and excludes all others including
Buyer's partners, Affiliates or sister companies. This offer is valid through
the full term of this contract.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 2
Page 1 of 8
SERVICES SCOPE OF WORK
1. GENERAL DESCRIPTION
The following section outlines the Scope of Work ("SOW") for the
implementation of Seller's Transmission Equipment on a Engineer, Furnish,
Install and Test basis under the Georgia/Florida Ring Project. Seller
would be pleased to provide additional material and services not covered by
the following SOW. Contact your Seller sales representative for a custom
quote with SOW for any additional requirements.
2. BUYER'S OBLIGATIONS
With respect to any Equipment and Services provided as part of this
Agreement, Buyer shall, at no charge to Seller provide the following,
unless otherwise stated and negotiated within the proposal:
General
-------
. Provide and coordinate access to all sites in a timely manor.
. Provide buyer contact(s) for Seller's installation crew with at 24 hour
emergency escalation point of contact.
. Provide reasonable security and storage facilities at Buyer's expense as
appropriate for Equipment and tools used by Seller.
. Provide access to reasonable washroom facilities twenty-four (24) hours
a day.
. Furnish adequate fire extinguishers at all Sites.
. Provide all required work permits.
. Furnish products requiring special fire ratings or other special
considerations not identified in this Agreement.
. Move Equipment from the storage facility to the installation site.
. Notify Seller when testing may re-commence if installation or test
activities are suspended due to the site not being ready. Two (2) week's
notice is required by Seller in order to allow scheduling of personnel.
In this case, a re-mobilization charge will apply which is in addition
to all costs contained herein. Corresponding changes will also be made
to the schedule for completion of the job.
Transmission Equipment
----------------------
. Store and furnish all electronics to the site locations.
. Supply existing grounding and lighting plans at each location when
requested.
. Furnish adequate lighting, AC receptacles and grounding connections at
all Sites.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 2
Page 2 of 8
. Furnish AC plus other cabling and connections beyond cross connect panel
into which the Seller provided Equipment will terminate.
. Supply any applicable drawings and relevant specifications which may
consist of, but not be limited to:
- floor plans indicating locations of all current and proposed Equipment
- auxiliary framework drawings indicating all current and proposed
ironwork
- signal and alarm assignments for existing and proposed Equipment other
than Seller's as it relates to the implementation of Seller's
Equipment provided under this Agreement. This information is required
four (4) weeks prior to installation starting.
. Provide termination cables and panels for DS-1s, DS-3s, etc., if the
Buyer does not elect to purchase this option from the Seller.
. Provide and install overhead racking for cables, etc. before Equipment
installation is to start, if the Buyer does not elect to purchase this
option from the Seller.
. Provide floor reinforcement to meet Transmission Equipment load
requirements, if required.
. Provide 240 VAC wall connections for attachment of DC power Equipment
where applicable.
. Provide optical patch cords and Variable Optical Attenuators (and or
fixed bulkhead type attenuators) from S/DMS Equipment to the patch
panel, if the buyer does not elect to purchase this option from Seller.
. Terminate all miscellaneous site related alarm cables, as required,
following completion of installation and test by Seller at each site
that do not directly cross connect with the Seller provided Equipment.
. Provide all DS3 cabling, BNC connectors, DSX-3 and DSx-1 Cross Connect
equipment, if the Buyer does not elect to purchase this option from
Seller.
3. SELLER'S OBLIGATIONS
With respect to any Transmission Equipment and Services provided under this
Project, Seller shall:
General
-------
. Provide regular status/progress reports to individual specified by
Buyer.
. Comply with local and state regulations regarding commercial building
electrical and fire codes where applicable.
. Provide all necessary tools and test Equipment required for test.
. Promptly remove packing and shipping materials used in the shipment of
Seller's Equipment following completion of work.
. Perform general site clean-up to assure the sites are in a neat and
clean condition following the completion of work.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 2
Page 3 of 8
Transmission Equipment
----------------------
. Test Seller-installed Equipment to the extent the Equipment is
configured at time of test at shelf access interfaces. Seller shall not
be responsible for the testing of unconfigured ports, fibers, cables or
other Equipment not specifically identified in this contract and
delivered before or during installation.
. Perform testing in compliance with applicable sections of correct NTP's
shipped with the Equipment. Testing required outside those tests defined
in the NTP's would incur additional charges as defined in the proposal.
. Provide acceptance test results on a per site basis as specified in the
NTP's.
. Provide a copy of NTP's to the sites identified in the proposal where
this Equipment will be installed.
4. GENERAL ASSUMPTIONS
This Agreement is based on the following assumptions:
. Seller assumes that all information provided to it by Buyer is correct
regarding general systems Equipment requirements, earthquake
requirements, and DS-3 traffic requirements. Seller shall not be
responsible for system deficiency caused by incomplete or inaccurate
information provided by Buyer.
. Seller shall define required routing of all connections to the Seller
provided equipment prior to or at the time that the engineering site
survey is performed. (ie. DS1, DS3, fiber, power, AC, alarm assignments,
bay locations, etc.)
. Seller's prices are based on its use of non-union labor at all sites.
When required, union labor will be provided at an additional cost to
Buyer.
. All sites, unless otherwise specified, are to use top supported 7'0"
Equipment racks.
. Buyer is to make voice communications available at all sites prior to
the start of Seller's installation and test activity.
. Buyer is to provide unimpeded access to all sites twenty-four (24) hours
a day for installation and testing activity.
. Buyer is to insure 110 VAC power will exist at all sites during
installation and test of all Equipment provided under this Agreement.
. Standard ring ground configurations or equivalent will exist at all
proposed installation Sites with standard bus bar type ground available
for Seller's power Equipment by the start of Seller's installation
period.
. All site auxiliary framing, associated ironwork, frame and aisle
lighting, ladder racking and outside plant cable protection is installed
and completed prior to the start of Seller's Installation activity at
each site, if the buyer does not elect to purchase this option from
Seller.
. All Transmission Equipment is to be mounted on conventional wooden or
concrete floors. If required, provisions for raised "computer" type
flooring
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 2
Page 4 of 8
applications can be provided at an additional cost to Buyer. Buyer must
notify Seller at least four (4) weeks in advance of installation start.
5. TRANSMISSION EQUIPMENT INSTALLATION MATERIALS
Miscellaneous installation materials will be provided, should the buyer
elect to purchase this option, by Seller on a per site basis. Pricing has
been provided in "lots" as defined in Seller provided Equipment list. The
following types of material are examples of what will be provided, but not
limited to:
. Top mounting hardware for Equipment frame
. Power cable and associated termination lugs
. Miscellaneous alarm cables/wiring.
. Protection for the overhead routing of simplex fiber cables (patch
cords) from top of frame to top of frame.
6. TRANSMISSION EQUIPMENT INSTALLATION SERVICES
Seller shall provide installation services for the Equipment and Services
provided under this Agreement consistent with Seller's Installation
Procedures as indicated in the release of NTP's relevant to the Buyer's
Equipment.
. Seller's installation personnel will inventory all Seller provided
Equipment at the time of installation start.
. Seller provides field supervision (in charge) to coordinate activities
of Seller's field personnel performing installation Services.
. Seller mounts Equipment racks/shelves, miscellaneous ironwork, and
cables as specified in the Installation Specification prepared by
Seller's Equipment engineering personnel.
. Seller performs continuity checks of wire/cabling.
. Seller stencils bays/fuse panels as assigned by Seller's Equipment
engineering
. Seller will cable and tag, as required, power and ground cables, optical
patch cords and pigtails, DS-1 and DS-3 alarm signal cabling, alarm and
telemetry cabling, and signal cabling.
. Seller will install cable runs from the Seller provided Equipment to the
customer defined connection point.
. Seller will be responsible for power plant, batteries, rectifiers,
generators, only if they are specified in the proposal.
. Seller will provide installation tools specified in the NTP's. The
Buyer will be responsible for any tools not specifically listed in the
NTP's or proposal.
. Seller will provide in-process inspections (quality audits).
7. TRANSMISSION EQUIPMENT TEST SERVICES
Seller shall provide Test Services consisting of the following:
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 2
Page 5 of 8
. In-bay testing of all Transmission Equipment in compliance with the
current NTP's.
. Test and turn-up of all Transmission Equipment circuit packs.
. Acceptance testing per applicable NTP's.
. Field supervision to coordinate activities of Seller's field personnel
performing testing.
. Receipt of Buyer sign-off of acceptance testing done in accordance with
applicable NTP's.
. Any test not specifically defined in the NTP's or proposal shall be
provided by the buyer.
8. BASIC ENGINEERING SERVICES, IF APPLICABLE
Basic Engineering Services, if provided at additional cost to Buyer, shall
be consistent with the Seller's current specifications. This services
package applies only to existing line-ups, and the installation team using
this package should be trained on Seller products. Basic Engineering
Services shall include the following:
. Phone customer information surveys to determine where the Seller's
Equipment is to be installed in order to identify installation
materials, notes and interconnections between the Seller provided and
Buyer's Equipment. If additional information is required that cannot be
obtained through remote collection , the buyer must pay additional time
and expense charges, so that an on site survey can be performed.
. Definition of required installation materials by part number and vendor
name as described in section 5.
. Review of Seller Equipment codes being ordered to verify baseline
requirements versus currently manufactured codes at time of order.
. Input of both Seller provided and installation material codes into
Seller's ordering system.
.
. Documentation package assembly and distribution for installation
. Generation / updating of customized site specific detailed installation
drawings and instruction packages which include the following;
Summary of the job / scope of work.
Overall Seller Network Layout Drawing
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 2
Page 6 of 8
Floor plan, cable rack, lighting, grounding and fiber guide drawings
detailing where the Seller's equipment is to be installed within the
customer's environment.
Bay drawings or notes, includes equipment within bay as well as
mechanicals of how to support top and bottom of bay to the customer
office environment.
Drawing of Shelf and Location of Circuit Packs within the shelf.
Fiber route drawings; between Bay, Shelf, Circuit Pack, and Fiber
Patch Panel.
Power cable and ground cable route drawings and power assignments.
Power plant/BDFB, front equipment, interconnect, fuse assignments
and running list drawings.
Manufacturing assembly drawings (bay layout) and notes.
Traffic routing drawings for DSX cross connections, DS-1, DS-3,
STS-1, etc....
Alarm assignment tables.
ESI assignment tables.
CNET interconnection tables between Seller provided Network Elements
Any other interconnection assignment tables between Seller provided
equipment and Customer Office specific Equipment
NOTE: All documentation is generated per Seller's standard
engineering package practices. Updating of drawings or traffic
routing on customer's specific databases is not specifically
included; however, this Service can be provided at an additional
cost.
9. FULL ENGINEERING SERVICES, IF APPLICABLE
Full Engineering Services, if provided at additional cost to Buyer, shall
be consistent with the Seller's current specifications. This services
package applies to new or existing line-ups and extensions or additions of
the superstructure. Full Engineering Services shall include the following:
. All items provided in the Basic Engineering Services Package, but
enhanced.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 2
Page 7 of 8
. Customer drawings in the specific type and format specified by the
buyer, in addition to the installation drawings specified in the Basic
Engineering Services Package. The seller will mark-up existing or
generate new customer site drawings. As built documentation will be
provided at conclusion of project.
. Site and / or phone customer information surveys at location where the
Seller's equipment is to be installed in order to identify installation
materials, notes and interconnections between the Seller provided and
Buyer's Equipment.
. Method of procedure for installations not covered by the NTP's or
Customer Application Procedures (CAP).
. Project management associated with the coordination of engineering and
installation services. Kick-off meeting and weekly status reviews with
engineering, installation, and the buyer. Escalation and resolution of
project impacting events from receipt of Purchase Order until the
installation completion notice.
. Engineering phone consultation from receipt of Purchase Order until the
installation completion notice. An engineer will be available to the
Buyer and installation team to answer questions and assist by phone, on
issues pertaining to this project.
. Power plant and BDFB provisioning to include battery plants.
. The update of Buyers databases / automated records is not included, but
can be provided at an additional charge.
10. ITEMS EXCLUDED FROM THIS SOW:
. Buyer's engineering personnel shall not repair Equipment, whether or not
the Equipment requiring repair is under warranty. Such repair shall be
performed according to Seller's Repair and Return Procedures.
. Any special transportation for access to Sites. (ie helicopters, snow
cats, etc.)
. Any engineering or re-engineering, install or test of existing
equipment, whether previously supplied by Seller or by another vendor,
unless otherwise stated in the proposal.
. Any and all items which are not specifically described within this SOW
or the Agreement as being provided by or the responsibility of Seller.
. Direct attachment of AC wires to circuits other than through a UL-
approved connectorized electrical outlet or any other work requiring an
electrician.
. Computer or raised floor reinforcement hardware for frames and
batteries.
. Miscellaneous cabling and associated installation fees which have not
been identified previously.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit G
Section 2
Page 8 of 8
. Interoperability with other vendor's equipment. Seller's Equipment
shall perform in accordance to the specifications provided in Seller's
applicable NTP's.
All other custom engineering and installation Services will be
considered on an individual basis for pricing purposes. Seller is a full
service supplier and would be pleased to quote any additional services
required.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit H
Page 1 of 1
Dedicated Engineer
Seller shall provide Buyer a dedicated Systems Engineer to work on all
Seller/Buyer SONET TransportNode projects.
Such engineer will be responsible for implementing SONET TransportNode projects
within guidelines stipulated by the Scope of Work set forth in Exhibit G,
Section 2.
Such engineer will be located at Seller's Alpharetta facility. As required,
such engineer shall travel to Buyer's West Point, Georgia site at Seller's
expense.
Such engineer will have the liberty to work on other Seller projects provided
that such work does not interfere with completing work assigned or generated by
Buyer.
This provision is provided solely to Buyer and excludes all others including;
Buyer's partners, Affiliates or sister companies. This offer is valid thru the
full term of this contract.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit I
Page 1 of 1
<TABLE>
<CAPTION>
REPLACEMENT EQUIPMENT
SECTION HEADING
<S> <C>
1 Replacement Equipment
2 Replacement Systems A, B, C
3 Replacement System D
</TABLE>
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit I
Section 1
Page 1 of 2
Equipment Replacement
In order to transition Buyer to an exclusive Seller SONET network, Seller agrees
to replace the following Lucent or NEC networks with new Seller OC-48 Equipment.
System A
Arab, Al to Huntsville, Al
Currently Lucent OC-48
Replace with: 2 OC-48 ring ADM's 1310 nm/1557 rim e/w 48 DS3's each
System B
Arab, Al to Birmingham to Eastside
Currently Lucent OC-48
Replace with: 3 OC 48 ring ADM's e/w 48 DS3's & 1 OC-48 Regen. 1557 n m
Optics
System C
Eastside to Alabama Power
Currently Lucent OC-48
Replace with : 2 OC-48 ring ADMs e/w 24 DS3, 1310 nm Optics
System D
Eastside to Sprint POP
Currently NEC 417
System E
Montgomery to Sprint POP
Currently NEC 417
Replace D&E with: 2 OC-48 Terminals and 2 OC-48 Regens e/w 48 DS3's each and
1557 nm Optics.
Please refer to the attached Equipment lists for specific details.
Seller will be responsible for providing Engineering, Installation and Equipment
to turn up service on these systems. Further, Seller will be responsible for
shipment of Equipment to site. Seller will also be responsible for
deinstallation and removal of Lucent/NEC equipment, after Buyer removes all
active traffic.
Seller is not responsible for optical link budget considerations. Should the
aforementioned Equipment fail to meet the optical link budget requirements Buyer
will be responsible for purchasing additional materials and services to make the
system functional.
<PAGE>
Contract No. IFN9301C
Amendment No. 7
Exhibit I
Section 1
Page 2 of 2
Seller is not responsible for any loss or interruption of traffic resident on
the existing network while cutting over to Seller's network.
Buyer will give Seller reasonable time to provide and then to turn up new
systems. Forecasted Delivery of Equipment is four (4) weeks. Unforecasted is
twelve (12) weeks.
Buyer will turn over title of Lucent equipment for Systems A, B &C to Seller at
the time of acceptance (ICN sign off) of each of Seller's systems. Seller is
then free to do what it chooses with such Lucent equipment.
Seller will provide systems D&E to Buyer in 1997 prior to the conclusion of IFNs
contract for traffic on these two (2) networks. Buyer will turn over title of
the NEC equipment (Systems D&E) to Seller within two (2) years of turnup of
replacement equipment. Seller is then free to do what it chooses with the NEC
equipment.
Seller is not responsible for providing spares for any of the aforementioned
networks.
<PAGE>
Exhibit 10.8
MASTER CAPACITY LEASE
This lease is entered into on the 22 day of July, 1996, by and between
Interstate FiberNet, acting on its own behalf and on behalf of any other
underlying provider of service identified on any Service Order (as defined in
the next paragraph) as "Provider" ("Lessor"), and InterCel PCS Services,
Inc.("Lessee"). Lessee desires to obtain nonswitched fiber optic transmission
capacity and ancillary services as described below ("Service") from Lessor, and
Lessor is willing to provide the Service pursuant to the terms and conditions
set forth herein.
NOW, THEREFORE, Lessee and Lessor hereby mutually agree as follows:
SERVICE, TERMS AND RATES: Lessor agrees to provide and Lessee agrees
to purchase the Service for the price(s) and subject to the terms and conditions
set forth herein. Attached hereto and incorporated herein by reference are
service descriptions (each referred to herein as a "Service Order") containing
details applicable to the Service to be provided under this Lease. Additional
Service Orders may be prepared by Lessee and Lessor from time to time and,
subject to execution by Lessee and acceptance by Lessor, shall be binding upon
Lessor and Lessee and shall be deemed a part of this Lease. Each Service Order
shall describe a level of Service and the two points of presence ("POPs") of
Lessor between which such Service is to be provided. Each Service Order shall
also set forth the "Requested Service Date," the term of this Lease applicable
thereto (the "Service Order Term"), the monthly charges ("Aggregate Monthly
Charges") for the Service, and any other charges, including, but not limited to,
installation, multiplexing, and
Page 1
<PAGE>
other recurring and nonrecurring charges. Discounts and minimum charges, if any,
applicable to the rates for the Service are each set forth in Schedule 1
----------
attached hereto and incorporated by reference. It is the responsibility of the
Lessee to obtain interconnection from Lessor's POPs described in each Service
Order to Lessee's facility. Lessor shall not be responsible for delays in the
provisioning of this interconnection and shall not postpone billing if this
interconnection is not provided by the Requested Service Date contained in each
Service Order. Lessee shall pay all Aggregate Monthly Charges billed by Lessor
during any such period of delay.
INTERSTATE FIBERNET InterCel PCS Services, Inc.
(Lessee's Corporate Name)
By: /s/ Douglas Shumate By: /s/ Gowton Achaibar
---------------------------- ----------------------------
(Authorized Representative) (Authorized Representative)
Name: Douglas Shumate Name: Gowton Achaibar
-------------------------- --------------------------
(Print) (Print)
Title: VP/CFO Title: V.P. Engineering
------------------------- -------------------------
Date: 7/22/96 Date: 7/22/96
-------------------------- --------------------------
Full Business Address: Full Business Address:
P.O. Box 510 1239 O. G. Skinner Drive
206 West 9th Street West Point, Georgia 31833
West Point, Georgia 31833 -------------------------------
Page 2
<PAGE>
Additional Terms and Conditions
1. TERM: The Term of this Lease shall commence on June 1, 1996,
("Commencement Date"), and unless earlier terminated in accordance with
Section 3 hereof, shall continue until 12:01 A.M. on the third (3rd) anniversary
- ---------
of the Commencement Date (the "Initial Term"). This Lease shall be automatically
extended for successive renewal terms of one (1) year each (each, a "Renewal
Term") unless either party delivers written notice to the other party of its
intent to terminate this Lease 90 days prior to the expiration of the Initial
Term or any Renewal Term.
2. PAYMENT AND TAXES:
2A. Lessee agrees to pay Lessor, due monthly in advance,
commencing on the first day of the first month immediately following the Service
Date (as defined below) and on the first day of each month thereafter (the "Due
Date"), Aggregate Monthly Charges as set forth on each Service Order; provided,
--------
however, that the first such payment under each Service Order shall be for the
- -------
period from the Service Date through the end of the next full month and shall be
due on the first day of the full month billed. (Example: a Service Order with
Service Date of February 12 would first be billed on the March invoice for the
period February 12 - March 31 with payment due March 1.) Installation and other
nonrecurring charges contained under "Service Charges" on each Service Order
shall be due with such first payment. "Service Date" shall mean the later of the
Requested Service Date set forth in the applicable Service Order or the date on
which Service under the applicable Service order first becomes available between
Lessor's POPs but in no event shall the Service Date be more than 30 days after
the Requested Service Date. If payment for any charges due hereunder is not
received by Lessor within thirty (30) days after the first day of the relevant
month, the balance due and unpaid shall thereafter be subject to a late payment
charge on such delinquent amounts at the rate of 1-1/2% per month or the maximum
lawful rate allowable under applicable law, whichever is lower.
2B. Lessee shall also pay any applicable federal, state or local
use, excise or sales taxes in connection with the Service furnished to Lessee
pursuant hereto. Furthermore, Lessor and Lessee shall cooperate in taking all
reasonable actions necessary to minimize, or to quality for exemptions from, any
such taxes, duties or liabilities, including the furnishing of certifications
that purchases by Lessee are for purposes of resale.
2C. Lessee acknowledges and agrees that Lessor may change the
Aggregate Monthly Charges applicable to any Service at any time after the
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<PAGE>
expiration of the initial Service Order Term specified in the applicable Service
Order upon thirty (30) days prior written notice to Lessee.
3. EARLY TERMINATION
3A. This Lease may be terminated by either party, at any time,
without liability to the other party, upon ten (10) days prior written notice to
the other party upon the occurrence of any of the following: (i) the failure of
the non-terminating party generally to pay its debts as such debts become due,
the admission by such party in writing of its inability to pay its debts as such
debts become due, or the making by such party of any general assignment for the
benefit of creditors; (ii) the commencement by the non-terminating party of any
case, proceeding, or other action seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts under any
law relating to bankruptcy, insolvency, or reorganization, or relief of debtors,
or seeking appointment of a receiver, trustee, custodian, or other similar
official for it or for all or any substantial part of its property; or (iii) the
commencement of any case, proceeding or other action against the non-terminating
party seeking to have any order for relief entered against such party as debtor,
or seeking reorganization, arrangement, adjustment, liquidation, dissolution or
composition of such party or its debts under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors, or seeking appointment of a
receiver, trustee, custodian, or other similar official for such party or for
all or any substantial part of the property of such party, and (I) such party
shall, by any act or omission, indicate its consent to, approval of, or
acquiescence in such case, proceeding or action, or (II) such case, proceeding
or action results in the entry of an order for relief which is not fully stayed
within seven business days after the entry thereof, or (III) such case,
proceeding, or action remains undismissed for a period of thirty (30) days or
more or is dismissed or suspended only pursuant to Section 305 of the United
States Bankruptcy Code or any corresponding provision of any future United
States Bankruptcy law.
3B. Upon thirty (30) days prior written notice, either party shall
have the right, without liability to the other, to terminate this Lease as to
any Service Order if any material rate or term contained herein and relevant to
the Service covered by such Service Order is substantially changed (to the
detriment of the terminating party) or is found to be unlawful or the
relationship between the parties hereunder is found to be unlawful, in each case
by order of the highest court of competent jurisdiction to which the matter is
appealed, of the Federal Communications Commission ("FCC"), or of any other
local, state or federal government authority of competent jurisdiction.
3C. Lessee may cancel this Lease with respect to any Service Order
for on-net circuits as detailed in Schedule 3, without being subject to any
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<PAGE>
termination charge or other payment, by written notice of such cancellation
given to Lessor not less than thirty (30) days prior to the date of such
cancellation, if: (i) due to no fault of Lessee, Service between Lessor's POPs
requested in such Service Order does not become first available on or before the
thirtieth (30th) day following the Requested Service Date set forth in such
Service Order; or (ii) the Service provided under this Lease with respect to
such Service Order is the subject of a continuous interruption in excess of
twelve (12) hours or a cumulative twenty-four (24) hours in a six month period
excluding a force majeure interruption detailed in Section 10 below; (iii) the
Service provided under this Lease with the respect to an individual circuit that
experiences two or more interruptions within a forty-five (45) day period; or
(iv) the Service provided under this Agreement does not meet or exceed the
Standards as defined in Section 8.
-------
4. SUSPENSION OR EARLY TERMINATION OF SERVICE: When payment in full
is not made by Lessee on or before any due date, Lessor, in its sole discretion,
shall have the right if the Customer does not cure the non-payment, on or before
the thirtieth (30th) calendar day after Lessor has given Lessee written notice
of nonpayment, to do either of the following: to suspend temporarily Service to
Lessee (either completely or only with respect to any affected Service Orders)
until such time as Lessee has paid all arrearages, including any interest as
specified herein, or to terminate Service (either completely or only with
respect to any affected Service Orders). Further, the Service provided Lessee is
subject to the condition that it not be used for any unlawful purpose or in any
unlawful manner, and Service may be terminated or suspended by Lessor (either
completely or only with respect to the affected Service Order(s)), at Lessor's
option, if any such prohibited use occurs. During any such temporary suspension,
and upon any such termination by Lessor, no Interruption (as defined in
Section 7) shall be deemed to occur for the purposes of Section 7 hereof.
- --------- ---------
5. SYSTEM MAINTENANCE: Subject to the provisions of Section 7
---------
hereof, Lessor represents that system maintenance normally will not result in
Interruptions, and that in the event that system maintenance should require the
Interruption of Service, to the extent reasonably possible, it shall be
accomplished only after prior notification to Lessee and will be completed
within a reasonable period of time.
6. AUTOMATIC RENEWAL: Upon the expiration of the initial Service
Order Term specified in each Service Order, or of any extension thereof, this
Lease shall continue in effect with respect to the Service covered thereby on a
month-to-month basis upon the same terms and conditions unless terminated by
either party upon thirty (30) days prior written notice; provided, however, that
-------- -------
Lessor may change the Monthly Charges applicable thereto pursuant to Section 2C
----------
hereof.
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<PAGE>
7. ALLOWANCE FOR INTERRUPTION OF SERVICE ON-NET CIRCUITS: An
"Interruption" means any two (2) second interval with a complete interruption of
transmission or a bit error rate worse than 1 X 10/-9/ for a particular
communications path within a route between Lessor's two POPs as shown on a
Service Order (a "Route"). In the event of an Interruption in the Service
provided under this Lease, allowance for the period of Interruption with respect
to each Route (under one or more Service Orders) affected by such Interruption,
if not due to the fault or negligence of the Lessee, shall be as follows:
7A. No credit shall be allowed for an interruption of six (6)
hours or less in the case of a Catastrophic Interruption, or of two (2) hours or
less in the case of a Non-Catastrophic Interruption. Lessee shall be credited
for an Interruption in excess of six (6) hours or two (2) hours, as the case may
be, at the rate of 1/1440 of the Aggregate Monthly Charges (as set forth under
"Service Charges" in each Service Order) applicable to the Service which is
subject to the Interruption for each half hour or major fraction thereof that an
Interruption continues, such Interruption to be measured from (i) the time of
notice by Lessee to Lessor that an Interruption has occurred to (ii) the time of
restoration, an "Interruption Allowance". For purposes of the foregoing,
"Catastrophic Interruption" includes a complete cable cut, an equipment
enclosure fire, an explosion, or any other circumstance of an extraordinary and
catastrophic nature, and "Non-Catastrophic Interruption" includes all
Interruptions other than Catastrophic Interruptions. Lessor agrees to modify the
Interruption Allowance for circuits provision on self-healing rings.
7B. When Service provided for a Route (under one or more Service
Orders) includes more than one communications path, the Interruption Allowance
shall apply only to the path(s) interrupted.
7C. An Interruption allowance shall not be applicable for any
period during which Lessee fails to afford reasonable access to any facilities
for the purpose of investigating and clearing troubles.
8. WARRANTY LIMITATION OF LIABILITY: Lessor's liability arising
out of delays in installation, commencement or restoration of the Service to be
provided under this Lease or out of mistakes, accidents, omissions,
interruptions, delays, errors or defects in transmission in the provision of
Service hereunder shall in no event exceed the amount of the allowance, if any,
available under Section 7 hereof. Without limiting the foregoing, Lessor shall
---------
have no obligation to provide alternative routing with respect to any Service
provided pursuant to this lease. SUBJECT TO SECTION 7, IN NO EVENT SHALL LESSOR
BE LIABLE TO THE LESSEE OR LESSEE'S CUSTOMERS OR CLIENTS OR TO ANY OTHER
Page 6
<PAGE>
PERSON, FIRM OR ENTITY IN ANY RESPECT, INCLUDING, WITHOUT LIMITATION, FOR ANY
DAMAGES, EITHER DIRECT, INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL, ACTUAL,
PUNITIVE, OR ANY OTHER DAMAGES, OR FOR ANY LOST PROFITS OF ANY KIND OR NATURE
WHATSOEVER, 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 LEASE OR
THE OBLIGATIONS OF LESSOR PURSUANT TO THIS LEASE. EXCEPT AS SET FORTH IN
SCHEDULE 5 OR IN SECTION 5 HEREOF, LESSOR MAKES NO WARRANTY, WHETHER EXPRESS,
---------
IMPLIED, OR STATUTORY, AS TO THE DESCRIPTION, QUALITY, MERCHANTABILITY,
COMPLETENESS OR FITNESS FOR ANY PURPOSE OF THE SERVICE, OR THE LOCAL ACCESS, OR
AS TO ANY OTHER MATTER, ALL OF WHICH WARRANTIES BY LESSOR ARE HEREBY EXCLUDED
AND DISCLAIMED. SEE SCHEDULE 5 WHERE INDUSTRY STANDARDS ARE DETAILED.
9. TERMINATION LIABILITY: Except as set forth in Section 3 above, if
---------
Lessee cancels any Service Order (or any Service covered thereby) during its
Service Order Term, a termination liability equal to the lesser of six months of
the Aggregate Monthly Charges or the full amount of the Aggregate Monthly
Charges applicable to the remainder of the Service Order Term for such Service
Order (or for such Service covered thereby) shall be immediately due, owing and
payable without demand by Lessee.
10. FORCE MAJEURE:
10A. Except as provided in Section 10B below, Lessor shall not
-----------
be liable for any failure of performance hereunder due to causes beyond its
reasonable control, including, but not limited to, acts of God, fire, explosion,
vandalism, cable cut, storm or other similar catastrophes; any law, order,
regulation, direction, action or request of the United States Government, or of
any other government, including state and local governments having jurisdiction
over either of the parties, or of any department, agency, commission, court,
bureau, corporation or other instrumentality of any one or more of said
governments, or of any civil or military authority; national emergencies;
insurrections, riots, or wars; or strikes, lockouts, work stoppages or other
labor disputes or difficulties.
10B. If such failure of performance shall be on the part of
Lessor and shall be for: (i) thirty (30) days or less, then this Lease shall
remain in effect with no liability for either party and no charge to Lessee for
the period of such failure of performance; and (ii) more than thirty (30) days,
then this Lease shall be canceled with no liability on the part of either Lessor
or Lessee.
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<PAGE>
11. LIMITATIONS OF SERVICE: Notwithstanding any other provision of
this Lease, this Lease applies only to Service provided to Lessee, and shall
not apply to offerings by Lessee of services to Lessee's customers. The
provision of Service by Lessor as set forth in this Lease does not constitute a
joint undertaking with Lessee for the furnishing of any service to customers of
Lessee. Whenever Service provided by Lessor under this Lease is connected to
facilities provided by another person or entity, the regulations, terms and
charges of such other person or entity shall apply for the facilities provided
by such other person or entity. Services provided to Lessee under this Lease
may be connected to other facilities of Lessee between certain locations and
thereby constitute a portion of end-to-end service furnished by Lessee to its
customers. Lessor does not undertake to transmit messages, or to offer any
telecommunications services to any person or entity other than Lessee, under the
Lease.
12. INTER-CARRIER LEASE: Lessor and Lessee agree that this Lease, 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.
13. TRADE NAMES: Neither Lessee or Lessor shall, without the other
party's prior written consent: (i) use the other party's name in promotional,
advertising or other materials, or (ii) use the other party's logos, trade
marks, capacity marks, or any variations thereof in any of its promotional,
advertising or other materials.
14. ADDITIONAL PROVISIONS:
14A. Nothing in this Lease shall be deemed to create any
relationship between Lessor and Lessee other than that of independent parties
contracting with each other solely for the purpose of carrying out the
provisions of this Lease. Neither of the parties hereto shall be deemed or
construed, by virtue of this Lease, to be the agent, employee, representative,
partner, or joint venturer of the other. Neither party is authorized, by virtue
of this Lease, to represent the other party for any purpose whatsoever without
the prior written consent of the other party.
14B. In connection with the matters provided for in this Lease,
each party hereto shall comply with all applicable laws and regulations,
including, but not limited to, the Communications Act of 1934, as amended, and
the policies, rules and regulations of the FCC.
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<PAGE>
14C. Neither the waiver by either of the parties hereto of a
breach or a default under any of the provisions of this Lease, nor the failure
of either of the parties, on one or more occasions, to enforce any of the
provisions of this Lease or to exercise any right or privilege hereunder shall
thereafter be construed as a waiver of any subsequent breach or default of a
similar nature, or as a waiver of any such provisions, rights or privileges
hereunder.
14D. Lessee hereby agrees to indemnify, defend and hold harmless
Lessor and its affiliates, and their respective employees, officers, directors
and agents (collectively, "Lessor Indemnified Persons") from and against and in
respect of all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and attorneys' fees and disbursements (collectively,
"Claims"), to the extent any such Claim is asserted by any third party, person
or entity, against, resulting to, imposed upon or incurred by the Lessor
Indemnified Person, directly or indirectly, by reason of or resulting from any
misrepresentation or noncompliance with any covenant, condition or other
agreement, given or made by Lessee in or pursuant to this Lease.
14E. In the event suit is brought or an attorney is retained by
any party to this Lease to enforce the terms of this Lease or to collect money
due hereunder, the prevailing party shall be entitled to recover, in addition
to any other remedy, reimbursement for reasonable attorney fees, court costs,
costs of investigation and other related expenses incurred in connection
therewith.
14F. For purposes of Sections 8 and 11, the term "Lessor" shall
---------- --
be deemed to include Lessor and (i) any person or entity (including any partner,
stockholder, director, officer, employee or agent of Lessor) assisting Lessor in
its performance pursuant to this Lease and (ii) in the event that a "Provider"
other than Interstate FiberNet is designated in the applicable Service Order,
Interstate FiberNet, as agent for such designated Provider. For purposes of
Sections 10, 13, 14D and 14E, the term "Lessor" shall also be deemed to include
- ----------- -- --- ---
Interstate FiberNet in the event that a "Provider" other than Interstate
FiberNet is designated in the applicable Service Order.
14G. This Lease shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns;
provided, however, neither party may shall not assign or transfer its rights or
- -------- -------
obligations under this Lease without the prior written consent of the other
party hereto, which consent shall not be unreasonably withheld.
14H. All notices, demands, requests, or other communications
which may be or are required to be given, served, or sent by any party to any
other
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<PAGE>
party pursuant to this Lease shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery (including delivery by courier) to the
person whose name and business address appears under each party's signature line
on page 2 of this Lease. Each party may designate by notice in writing a new
person and/or address to which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand, request, or
communication which shall be mailed, delivered or transmitted in the manner
described above shall be deemed sufficiently given, served, sent and received
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, the affidavit of messenger or (with
respect to a facsimile) the confirmation being deemed conclusive (but not
exclusive) evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
14I. If the Service is provided solely within a single state in a
manner which subjects the Service to regulation by any state, then the terms and
conditions of the Service and of this Lease shall be subject to such regulations
and to any addendum to this Lease relating thereto which is executed by Lessor
and Lessee.
14J. The Service provided by Lessor as set forth in each separate
Service Order attached hereto is severable, and upon termination of the Service
with respect to any Service Order (upon expiration of the Service Order Term
thereof or pursuant to the provisions of Sections 3B, 3C, 4, or 9 hereof), the
----------- -- - -
Service with respect to other Service Orders shall continue unaffected.
14K. This Lease (including all Service Orders and Schedule 1 hereto)
----------
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof, and it supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein.
The terms of this Lease may only be amended or modified by an instrument in
writing executed by the parties hereto.
14L. If any part of any provision of this Lease or any other
agreement, document or writing given pursuant to or in connection with this
Lease 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 Lease
and the parties hereby agree to negotiate with respect to any such invalid or
unenforceable part to the extent necessary to render such part valid and
enforceable.
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<PAGE>
14M. 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 Lease against either of the parties
hereto, and that the covenants, undertakings, and agreements set forth in this
Lease 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.
14N. This Lease, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed
in accordance with the laws of Georgia (but not including the choice of law
rules thereof).
14O. The terms and provisions contained in this Lease that by their
sense and context are intended to survive the performance thereof by the parties
hereto shall so survive the completion of performance and termination of this
Lease, including, without limitation, provisions for indemnification and the
making of any and all payments due hereunder.
14P. Section and subsection headings contained in this Lease are
inserted for convenience of reference only, shall not be deemed to be a part of
this Lease for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof. All pronouns
and any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or entity may require.
14Q. Customer appoints Alecia D. Green as its "Contract
Administrator." IFN appoints Doug Shumate as its "Contract Administrator."
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Schedule 1
SERVICE ORDER
Master Capacity Lease No.: Date of Master Capacity Lease:
----------- ---------
The following order for service on the specified terms and conditions herein is
made by the undersigned Lessee pursuant to the Master Capacity Lease referred to
above ("Master Capacity Lease").
Date:
----------------------------------
Provider:
--------------------------------
(If no other "Provider" is named, Interstate FiberNet shall be the Provider of
Service for purposes of this Service Order.)
PON:
----------------------
I. CAPACITY. Under this Lease, Lessor will provide the following capacity
--------
and ancillary services between its Points of Presence in the following cities:
Capacity Requested Service
City A City Z Description Quantity Date
- ------ ------ ----------- -------- ----
II. SERVICE CHARGES
---------------
A. Aggregate Monthly Charges: $ per month
-------
(of which amount, $ are charges for capacity and
--------
$ are charges for ancillary services)
-------
B. Non-Recurring Charges: $
-------
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<PAGE>
C. Discounts Applicable? Yes No
----- -----
If yes, the applicable discounts are set forth on Schedule 1.
----------
D. Monthly Minimums Applicable? Yes No
----- -----
If yes, the applicable monthly minimum charges are set forth on
Schedule 1.
----------
III. TERMS OF PAYMENT. Monthly in advance, on the first day of each month, as
----------------
more fully described in the Master Capacity Lease. Any payment not received on
or before the required payment date as specified in the Master Capacity Lease
shall be subject to a late payment charge, also specified therein.
IV. SERVICE ORDER TERM. years (or months) from the Service Date.
------------------ ------ ---
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<PAGE>
V. BASIC AGREEMENT. This Service Order is hereby incorporated in its entirety
---------------
into the Master Capacity Lease, and is hereby executed by the respective parties
hereto as of _________, 1996.
LESSEE:
-----------------------------------
By: /s/ Gowton Achaibar
--------------------------------
Name: Gowton Achaibar
Title: V.P. Engineering
LESSOR:
INTERSTATE FIBERNET
If this block is executed by Interstate
FiberNet, Interstate FiberNet shall be By:
the Provider of Service --------------------------------
Name:
Title:
If this block is executed by Interstate -----------------------------------
FiberNet, the Provider of Service shall PROVIDER
be the party so designated in this
Service Order, and Interstate FiberNet By: INTERSTATE FIBERNET
shall be acting on behalf of such Provider, AGENT
as agent.
By:
---------------------------------
Name:
Title:
14
<PAGE>
Schedule 2
----------
Discounts and Minimums Charges
------------------------------
1. Discounts:
Prepayment Discount. Each Lessee agrees that it must pay for all Service
-------------------
rendered to it under this Lease, in advance, by the first day of each month
during the term hereof. Payments received by Lessor by the first day of the
month shall be subject to a 2% discount off the aggregate Monthly Charges for
such month.
Volume Discounts. A volume discount ("Volume Discount") shall apply to all
----------------
Aggregate Monthly Charges owed under this Lease from the first dollar billed for
such month pursuant to the following Volume Discount schedule once the following
volume levels for services ordered by Lessee pursuant to this Lease or any other
agreement with IFN or Eastern Telecom d/b/a InterQuest ("InterQuest") are met:
<TABLE>
<CAPTION>
Aggregate Charges and Fees Billed Volume Discounts
Pursuant to any Agreement on Aggregate Monthly
(calculated after all applicable Charges Billed
discounts Under this Lease
other than the Volume Discount
- ------------------------------------- ----------------------------------------
Volume Discount Charges Billed
--------------- ---------------
<S> <C> <C>
$100,000 1% of $0-$150,000
$150,000 2% of $0-$250,000
$250,000 3% of ALL AGGREGATE
CHARGES
</TABLE>
Amounts billed to the Lessee by IFN or InterQuest pursuant to agreements
other than this Lease for services provided by IFN or InterQuest to the Lessee
including, without limitation, Operator, SS7, and Directory Assistance Services,
shall be included in calculating the applicable Volume Discount level attained
by the Lessee for purposes of calculating the Volume Discount applicable to the
Aggregate Monthly Charges owed under this Lease, but the Volume Discount shall
not apply to any amounts that are billed pursuant to agreement other than this
Lease. (Example: if the aggregate charges and fees billed to the Lessee for
January pursuant to all agreements with IFN or InterQuest and this Lease are
$400,000 and the Aggregate Monthly Charges for January under this Lease are
$210,000, then Lessee would be entitled to a 3% discount on the $210,000.
Free Month Promotion. For on-net circuits, Lessee shall receive a credit
--------------------
equal to a free month in the 12th, 24th, and 36 month for DS-1, fractional DS-3,
DS-3, DS-3
15
<PAGE>
circuits. OC Service and services other than DS-1, fractional DS-3 and DS-3
Services shall not be eligible for the free month promotion. No free month will
be provided for an on-net circuit that is in service less than eleven (11)
months.
Fractional DS-3 Discount. A Fractional DS-3 discount shall apply to multiple
------------------------
on-net DS-ls serving the same InterLATA A to A City Pairs as follows:
Number of DS-ls to Same Discount Off Standard
InterLATA A to A Pairs InterLATA A to A City DS-1 Charge
---------------------- ---------------------------------
3-6 15%
7-10 22%
11 or more 30%
A Fractional DS-3 discount shall apply to multiple on-net DS-ls serving the
same IntraLATA A to B City Pairs as follows:
Number of DS-1s is to Same Discount Off Standard
IntraLATA A to B City Pairs IntraLATA A to B City DS-1 Charge
--------------------------- ---------------------------------
3-6 25%
7-10 32%
11 or more 40%
Network DS-Ramp up Incentive. For ON NET city pairs where Lessee requires
----------------------------
eight or more DS-ls between the same city pairs, Lessee will bill those DS-ls at
1/28th of the DS-3 rate per DS-1 for a maximum period of six months.
Cancellation is not permitted during the ramp up period. Beginning with the 7th
month from the date the first DS-1 is installed, Lessee agrees to pay the full
DS-3 rate and the six month minimum term shall begin for that DS-3.
2. Minimums
Minimum Commitment. Lessee agrees to pay Lessor Aggregate Monthly Charges of
------------------
not less than $75,000 ("Minimum Commitment"). Such Minimum Commitment is
calculated prior to any free month received for a circuit. This Minimum
Commitment will not begin until April 1997 (the "Initial Ramp Period":). This
Minimum Commitment may be met by billings generated by ON-NET and OFF-NET
billings as long as Lessor is the provider (defined as Lessor ordering and
billing) of greater than or equal to 95% (measured in dollars) of Lessee's
interexchange network requirements. However, in the event that Lessee can obtain
a OFF-NET circuit at a price below the price offered by the Lessor under this
Agreement, Lessor must (i) meet the lower price, or (ii) allow the Lessee to
lower its $75,000 Minimum Commitment by the monthly price of the circuit
"purchased" from another vendor. In no case shall the Minimum Commitment be
lowered below
16
<PAGE>
$35,000 per month. If the Minimum Commitment is lowered, the Lessee shall still
receive the ON-NET pricing detailed on Schedule 4 through the term of this
Agreement.
In the event the Lessor purchases a circuit from another vendor subject to
the restrictions above, the Lessor will still be required to purchase 95%
(measured in dollars) of the Lessee's remaining interexchange network
requirements (excluding the circuits purchased from another vendor) from the
Lessor. Example: Lessee purchases a $6,000 circuit from another vendor as a
result of the Lessor not agreeing to meet a lower price. Lessee's total
interexchange network including the $6,000 circuit equals $80,000 a month.
Lessee would be required to buy at least $70,300 of their interexchange network
from Lessor (($80,000-6,000) X .95%) = $70,300).
Other Minimums. There shall be no minimum Service Order term requirements
--------------
for DS-1 Service. Each Service Order covering DS-3, or Fractional DS-3 Service
shall have a term of at least six months. Each Service Order covering OC Service
shall have a term of at least three years. Neither DS-1 nor DS-3 Service shall
be subject to circuit minimum lengths.
17
<PAGE>
Deficiency Charge. In the event Lessee does not maintain the Minimum
-----------------
Commitment in the months indicated, then for those month(s) only, Lessee will
pay Lessor the difference between the Minimum Commitment for such month(s) and
the Aggregate Monthly Charges for such month(s) as described on each Service
Order, net of any applicable discounts (the "Deficiency Charge"). The Deficiency
Charge will be due at the same time payment is due for Service provided to the
Lessee, or immediately in an amount equal to the Minimum Commitment for the
unexpired portion of the Initial Term, if (i) Lessee terminates the Lease before
the expiration of the Initial Term unless Lessee terminates the Lease pursuant
to Section 3A or Section 3B of the Agreement, or (ii) Lessor terminates the
Lease pursuant to Section 4 of the Agreement.
--------------------------
3. Performance Clause Options.
A. In the event Lessee experiences delayed network implementation Lessor
will extend the Initial Ramp Period and contract period upon written notice by
Lessee to IFN and confirmation that Lessor has greater than or equal to 95% (as
measured in dollars) of Lessee's interexchange network services.
B. In the event Lessee experiences a "business slowdown" during the first
two years of this term agreement, Lessor will not enforce the MBVC revenue
commitment upon receiving written notice from Lessee that they cannot meet the
minimum due under the agreement. As condition of this section 3B, Lessor must be
the provider of greater than 95% (as measured in dollars) of Lessee's
interexchange network services including circuits purchased offnet to effect
redundancy in Lessee's network.
4. Restrictions
Lessee agrees that the services provided by Lessor will be used solely by
Lessee and shall not be resold.
Page 18
<PAGE>
Schedule 3
----------
On-Net
Tier A, Tier B and Other Cities
<TABLE>
<CAPTION>
Tier A Tier B
------ ------
<S> <C>
Atlanta, GA * West Point, GA *
Birmingham, AL * LaGrange, GA *
Tuscaloosa, AL Newnan, GA *
Shreveport, LA Gainesville, GA
Monroe, LA Anniston, AL *
Greenville, SC Opelika, AL
Spartanburg, SC Auburn, AL
Raleigh, NC Gadsden, AL
Winston-Salem, N High Point, NC
Greensboro, NC Vicksburg, MS
Charlotte, NC Carrollton, GA
Asheville, NC Leeds, AL *
Gulfport, MS Pell City, AL *
Meridian, MS
Jackson, MS
Hattiesburg, MS
Other Cities -
------------
Columbus, GA *
Huntsville, AL
Athens, GA
</TABLE>
* Ring Protected as of 1/1/96
19
<PAGE>
Schedule 4
----------
Current Pricing
---------------
Tier A to Tier A Cities - ON-NET
- --------------------------------
DS-1 Base Rate $0.102
DS-3 Base Rate $0.0501
Lessee acknowledges and agrees that it shall not be permitted to drop and insert
into a Tier B City within a Tier A to Tier A City Service Order.
Tier B to Tier B Cities and Tier A to Tier B Cities - ON-NET
- ------------------------------------------------------------
Except as set forth below, the base rate for Tier B Cities shall be the RBOC
tariffed rate in effect for the applicable Tier B Cities, less 25%, (the "Tier B
Rate"); provided, however, if Lessee provides documentation satisfactory to
-------- -------
Lessor establishing that a DS-1 or DS-3 circuit between two Tier B Cities or
from a Tier A City to a Tier B City, of comparable quality and mileage to
Lessor's, can be purchased at a rate lower than the applicable Tier B Rate,
Lessor will have the option to match such lower rate so long as such lower rate
is not less than the Tier A City Base Rate for such DS-1 or DS-3 Service;
provided, further, in no event shall Lessor be obligated to meet or beat any
- -------- -------
such lower rates.
In the event that a carrier other than Lessor, the RBOC or any Local Exchange
Carrier provides fiber optic transport services to a Tier B City to which Lessor
is providing Service hereunder, the Lessee shall provide Lessor with the
opportunity to meet or beat any price(s) quoted to the Lessee by such carrier
for fiber optic transport service to such Tier B City; provided, however, in no
-------- -------
event shall Lessor be obligated to meet or beat such lower price(s).
With respect to the foregoing two paragraphs, in the event that Lessor does not
meet or beat such lower price, the Lessee shall have the right to disconnect any
existing circuit(s) to such Tier B City without incurring any termination charge
pursuant to Section 9 of this Lease, and, upon such disconnection, Lessor shall
---------
deduct from the monthly Minimum Commitment of Lessee, as of the beginning of the
next succeeding calendar month, an amount equal to the greater of such lower
price or the Tier A City Base Rate for DS-1 or DS-3 Service, as appropriate.
Page 20
<PAGE>
Other City Pair Prices - ON-NET
- -------------------------------
Atlanta, GA to Athens, GA
Atlanta, GA to Columbus, GA
Birmigham, AL to Huntsville, AL *
DS-1/DSO Mile $0.13
DS-3/DSO Mile $0.065
*Upon IFN's installation of a new electronics system from Birmingham to
Huntsville.
OC Pricing - ON-NET
- -------------------
All OC Service shall be taken by Lessee at the optional level.
OC3 Service for fiber optic facilities 60 or more V&H miles long - $0.04/DSO
Mile.
OC12 Service for fiber optic facilities 60 or more V&H miles long - $0.036/DSO
Mile.
Prices for OC3 and OC12 fiber optic facilities less than 60 V&H miles long will
be negotiated in good faith by the parties hereto.
Offnet Capacity Pricing
- -----------------------
Lessor will provide offnet capacity to Lessee at its direct cost plus 20%.
Lessor will provide Lessee the same terms and conditions that Lessor receives on
OffNet purchases. Current terms and conditions require a minimum of a 12 month
term on all circuits purchased from Sprint and a one month minimum term on the
circuits purchased form MCI, WorldCom and AT&T.
Initial Capacity
- ----------------
For a period of twelve months, Lessor will honor the pricing for the initial
capacity detailed on Schedule 6, required of Lessee.
----------
Installation Charges
- --------------------
ON-NET - NONE
OFF-NET
Page 21
<PAGE>
Actual installation charges incurred.
All installation charges are one time charges and non-recurring.
Page 22
<PAGE>
Tier B City Pricing
POP Data
Birmingham
- ---------------------- ----------------------------
City Serving Wire Center
- ---------------------- ----------------------------
Birmingham, Alabama NPA-NXX 205-250
Alabama Power Company CLLI BRHMALMT
Headquarters V-Coord 7518
600 North 18 Street H-Cord 2446
ACTEL BRHMAL16RA
LATA 476
- ---------------------- ----------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DS-3 Rates DS-1 Rates
V&H Per DSO Per Month Per DSO
"Z" City Miles Mile Mile Per Month
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gadsden 58 $0.280 $10,913.28 $0.600 $835.20
Newnan 117 $0.200 $15,724.80 $0.600 $1,684.80
La Grange 108 $0.200 $14,515.20 $0.600 $1,555.20
West Point 105 $0.300 $21,168.00 $0.600 $$1,512.00
Opelika 102 $0.159 $10,898.50 $0.400 $979.20
*Gainesville 180 $0.150 $18,144.00 $0.400 $1,728.00
Auburn 99 $0.300 $19,958.40 $0.600 $1,425.60
Pell City 31 $0.300 $6,249.60 $0.600 $446.40
Leeds 16 $0.300 $3,225.60 $0.600 $230.40
Anniston 58 $0.105 $4,092.48 $0.180 $250.56
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Special Services
- --------------------------------------------------------------------------------
Monthly
Service Non-Recurring Recurring
- --------------------------------------------------------------------------------
<S> <C> <C>
DS-3 DACS (where available) per port per month $100.00 $400.00
*Interconnection Fee per DS-3 $600.00
per DS-1 $90.00
Drop & Insert Service per location per month $400.00 $800.00
- --------------------------------------------------------------------------------
</TABLE>
Effective date January 1, 1996
<PAGE>
TIER B CITY PRICING
POP DATA
JACKSON
- ----------------------------------- -----------------------------------
City Serving Wire Center
- ----------------------------------- -----------------------------------
Jackson, Mississippi NPA-NXX 601-352
248 East Capitol, Suite 939 CLLI JCSNMSCP
Trustmark Building V-Coord 8035
H-Cord 2879
ACTEL JCSNMS58WLF
LATA 482
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DS-3 Rates DS-1 Rates
V&H Per DSO Per Month Per DSO
"Z" City Miles Mile Mile Per Month
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Vicksburg 40 $0.300 $8,064.00 $0.600 $576.00
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Special Services
- --------------------------------------------------------------------------------
Monthly
Service Non-Recurring Recurring
- --------------------------------------------------------------------------------
<S> <C> <C>
DS-3 DACS (where available) per port per month $100.00 $400.00
*Interconnection Fee per DS-3 $600.00
per DS-1 $90.00
Drop & Insert Service per location per month $400.00 $800.00
- --------------------------------------------------------------------------------
</TABLE>
Effective date January 1, 1996
Page 24
<PAGE>
TIER B CITY PRICING
POP DATA
ATLANTA
- ----------------------------------- -----------------------------------
City Serving Wire Center
- ----------------------------------- -----------------------------------
Atlanta, Georgia NPA-NXX 404-221
Suite 300 CLLI ATLNGACS
55 Park Place V-Coord 7259
H-Cord 2085
ACTEL ATLNGAPKWA1
LATA 438
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DS-3 Rates DS-1 Rates
V & H Per DSO Per Month Per DSO
"Z" City Miles Mile Mile Per Month
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Anniston 84 $0.105 $5,927.04 $0.180 $362.88
Gadsden 95 $0.200 $12,768.00 $0.400 $912.00
Newman 36 $0.300 $7,257.60 $0.400 $345.60
LaGrange 62 $0.277 $11,540.93 $0.600 $892.80
West Point 76 $0.300 $15,321.60 $0.600 $1,094.40
Opelika 96 $0.169 $10,902.53 $0.420 $967.68
*Gainesville 50 $0.287 $9,643.20 $0.600 $720.00
Pell City 110 $0.160 $11,827.20 $0.600 $1,584.00
Leeds 125 $0.140 $11,760.00 $0.600 $1,800.00
Auburn 101 $0.300 $20,361.60 $0.600 $1,454.40
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Special Services
- --------------------------------------------------------------------------------
Monthly
Service Non-Recurring Recurring
- --------------------------------------------------------------------------------
<S> <C> <C>
DS-3 DACS (where available) per port per month $100.00 $400.00
*Interconnection Fee per DS-3 $600.00
per DS-1 $90.00
Drop & Insert Service per location per month $400.00 $800.00
- --------------------------------------------------------------------------------
</TABLE>
Effective date January 1, 1996
Page 25
<PAGE>
Schedule 5
IFN warrants that the service to be provided under this Agreement will be in
compliance with prevailing industry standards and with the following technical
specifications (collectively, the "Standards").
1. Availability Requirements:
. DS-3's 99.99% of the time
. DS-1's 99.97% of the time
2. Background bit/error rate ratio:
. DS-3's 1 x 10-/9/
. DS-1's 1 x 10-/9/
3. Frame Format:
. Frame formats must be transparent to all framing
4. Error Free Seconds:
. 99.9% of the time
5. Test Periods:
. DS-3's At least 72 hours advance notice
. DS-1's At least 24 hours advance notice
5. Maximum delay on the circuit:
. 1 millisecond per 125 miles
<PAGE>
Schedule 6
----------
INITIAL QUOTE
$75,000 COMMITMENT LEVEL
DS3 City Pair
- -------------
<TABLE>
<CAPTION>
A Location Z Location Vendor 1 Vender 2 On Net Off Net Billed Price Price per DS-0
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SWITCH SITE: BIRMINGHAM
BIRMINGHAM LATA
- -------------------------------------------------------------------------------------------------------------------------
Birmingham Anniston IFN $4,092.00 $.1050
- -------------------------------------------------------------------------------------------------------------------------
Anniston Gadsden IFN $2,177.28 $.1200
- -------------------------------------------------------------------------------------------------------------------------
Birmingham Tuscaloosa IFN $1,649.69 $.0501
- -------------------------------------------------------------------------------------------------------------------------
Tuscaloosa Meridan, MS IFN $2,962.71 $.0501
- -------------------------------------------------------------------------------------------------------------------------
HUNTSVILLE LATA
- -------------------------------------------------------------------------------------------------------------------------
Birmingham Huntsville Delta/IFN
- -------------------------------------------------------------------------------------------------------------------------
Birmingham Huntsville MCI
- -------------------------------------------------------------------------------------------------------------------------
Huntsville Florence MCI
- -------------------------------------------------------------------------------------------------------------------------
MONTGOMERY LATA
- -------------------------------------------------------------------------------------------------------------------------
Birmingham Montgomery ATT
- -------------------------------------------------------------------------------------------------------------------------
Birmingham Montgomery Sprint
- -------------------------------------------------------------------------------------------------------------------------
Montgomery Dothan Delta/IFN
- -------------------------------------------------------------------------------------------------------------------------
SWITCH SITE: MEMPHIS
JACKSON, MS LATA
- -------------------------------------------------------------------------------------------------------------------------
Memphis Jackson, MS ATT
- -------------------------------------------------------------------------------------------------------------------------
Memphis Jackson, MS MCI
- -------------------------------------------------------------------------------------------------------------------------
Jackson, MS Meridian IFN $3,163.77 $.0535
- -------------------------------------------------------------------------------------------------------------------------
Memphis Tupelo ATT
- -------------------------------------------------------------------------------------------------------------------------
SWITCH SITE: JACKSONVILLE
GAINESVILLE LATA
- -------------------------------------------------------------------------------------------------------------------------
Jacksonville Gainesville MCI
- -------------------------------------------------------------------------------------------------------------------------
TALLAHASSEE LATA
- -------------------------------------------------------------------------------------------------------------------------
Jacksonville Tallahassee MCI
- -------------------------------------------------------------------------------------------------------------------------
ATT
- -------------------------------------------------------------------------------------------------------------------------
PANAMA CITY LATA
- -------------------------------------------------------------------------------------------------------------------------
Tallahassee Panama City ATT
- -------------------------------------------------------------------------------------------------------------------------
Tallahassee Chipley MCI
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
After Impact of After Impact of
Free Month Free Month
Effective Price Price Per DS-0 Mileage
- -------------------------------------------------------------------
<S> <C> <C> <C>
SWITCH SITE:
BIRMINGHAM LATA
- --------------------------------------------------------------------
Birmingham $3,751.13 $.0962 58
- --------------------------------------------------------------------
Anniston $1,995.91 $.1100 27
- --------------------------------------------------------------------
Birmingham $1,512.27 $.0459 49
- --------------------------------------------------------------------
Tuscaloosa $2,714.34 $.0459 88
- --------------------------------------------------------------------
HUNTSVILLE LATA
- --------------------------------------------------------------------
Birmingham $3,712.80 $ .065 85
- --------------------------------------------------------------------
Birmingham $3,338.08 $.0584 85
- --------------------------------------------------------------------
Huntsville $2,513.38 $.0584 64
- --------------------------------------------------------------------
MONTGOMERY LATA
- --------------------------------------------------------------------
Birmingham $4,551.97 $.0806 84
- --------------------------------------------------------------------
Birmingham $7,499.54 $.1328 84
- --------------------------------------------------------------------
Montgomery $23,940.00-(2) $.3750 95
- --------------------------------------------------------------------
SWITCH SITE:
JACKSON, MS LATA
- --------------------------------------------------------------------
Memphis $10,567.06 $.0806 195
- --------------------------------------------------------------------
Memphis N/A N/A 195
- --------------------------------------------------------------------
Jackson, MS $2,900.22 $.04904 88
- --------------------------------------------------------------------
Memphis $5,256.43 $.0806 97
- --------------------------------------------------------------------
SWITCH SITE:
GAINESVILLE LATA
- --------------------------------------------------------------------
Jacksonville $2,552.66 $.0584 65
- --------------------------------------------------------------------
TALLAHASSEE LATA
- --------------------------------------------------------------------
Jacksonville $6,165.64 $.0584 157
- --------------------------------------------------------------------
$8,507.84 $.0806 157
- --------------------------------------------------------------------
PANAMA CITY LATA
- --------------------------------------------------------------------
Tallahassee $4,497.78 $.0806 83
- --------------------------------------------------------------------
Tallahassee TBD TBD 80
- --------------------------------------------------------------------
</TABLE>
(1) Upon the successful transfer of the excess DeltaCom Network to IFN the
Pricing on this circuit will convert to $19,152 per month.
Page 27
<PAGE>
Exhibit 10.9
AMENDMENT NO. 1
TO
MASTER CAPACITY LEASE
This Amendment No. 1 to the Master Capacity Lease entered into by and
between Interstate FiberNet ("Lessor") and InterCel PCS Services, Inc.
("Lessee") dated July 22, 1996 is hereby amended as follows:
1. The name of Lessee shall be changed from "InterCel PCS Services, Inc." to
"Powertel, Inc."
2. Schedule 2 (Discounts and Minimum Charges), Section 4 (Restrictions) is
hereby replaced in its entirety with the following:
"Lessee agrees that, prior to any resale of "A" City On-Net DS-3
services provided by Lessor hereunder, Lessee shall consult with the
Lessor as to the terms and conditions of any such resale arrangement."
3. The effective date of this Amendment No. 1 is the 22 day of August, 1996. All
other provisions of the Master Capacity Lease shall remain in full force and
effect.
LESSEE: LESSOR
/s/ Gowton Achaibar /s/ Doug Shumate
- ----------------------------- ----------------------------
By: Gowton Achaibar By: Doug Shumate
Title: Vice President/Engineering Title: VP/CFO
<PAGE>
Exhibit 10.10
AMENDED AND RESTATED
LOAN AGREEMENT
DATED AS OF
March 27, 1997
by and among
GULF STATES TRANSMISSION SYSTEMS, INC.,
as Borrower
THE LENDERS
(as herein defined)
and
NATIONSBANK, N.A.
as Agent and as a Lender
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS...................................2
--------------------------------
1.01 Definitions.........................................................2
-----------
1.02 Computation of Time Periods........................................15
---------------------------
1.03 Accounting Terms...................................................15
----------------
1.04 Agreements Modified................................................15
-------------------
SECTION 2 THE LOANS.........................................................16
---------
2.01 Term Loan Commitment...............................................16
--------------------
2.02 Term Loan Notes....................................................16
---------------
2.03 Repayment of Principal.............................................16
----------------------
2.04 Interest...........................................................16
--------
2.05 Election of Loan Type..............................................17
---------------------
2.06 Prepayments........................................................17
-----------
SECTION 3 ADDITIONAL PROVISIONS REGARDING LOANS.............................18
-------------------------------------
3.01 Increased Costs, Illegality, etc...................................18
--------------------------------
3.02 Capital Adequacy...................................................19
----------------
3.03 Compensation.......................................................20
------------
3.04 Taxes..............................................................21
-----
3.05 Change of Lending Offices..........................................24
-------------------------
3.06 Payments and Computations..........................................24
-------------------------
3.07 Pro Rata Treatment.................................................24
------------------
3.08 Sharing of Payments................................................25
-------------------
3.09 Fees...............................................................25
----
SECTION 4 CONDITIONS PRECEDENT..............................................26
--------------------
4.01 Conditions to Closing..............................................26
---------------------
4.02 Conditions to Effectiveness........................................27
---------------------------
SECTION 5 REPRESENTATIONS AND WARRANTIES....................................29
------------------------------
5.01 Organization and Good Standing.....................................29
------------------------------
5.02 Due Authorization..................................................29
-----------------
5.03 No Conflicts.......................................................29
------------
5.04 Consents...........................................................29
--------
5.05 Enforceable Obligations............................................30
-----------------------
5.06 Financial Condition................................................30
-------------------
5.07 No Default.........................................................30
----------
5.08 Liens..............................................................30
-----
5.09 Indebtedness.......................................................30
------------
5.10 Litigation.........................................................30
----------
5.11 Material Agreements................................................31
-------------------
5.12 Taxes..............................................................31
-----
5.13 Compliance with Law................................................31
-------------------
5.14 ERISA..............................................................31
-----
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.15 Subsidiaries.....................................................32
------------
5.16 Use of Proceeds; Margin Stock....................................32
-----------------------------
5.17 Government Regulation............................................32
---------------------
5.18 Patents, etc. ...................................................32
------------
5.19 Solvency.........................................................32
--------
5.20 Business Activities..............................................32
-------------------
5.21 Property Interests...............................................32
------------------
5.22 Perfected Security Interest......................................33
---------------------------
5.23 Project Documents................................................33
-----------------
5.24 Full Disclosure..................................................33
---------------
5.25 Environmental Compliance.........................................33
------------------------
SECTION 6 AFFIRMATIVE COVENANTS.............................................33
---------------------
6.01 Information Covenants............................................33
---------------------
6.02 Preservation of Existence and Franchises.........................36
----------------------------------------
6.03 Books, Records and Inspections...................................36
------------------------------
6.04 Compliance with Law..............................................36
-------------------
6.05 Payment of Taxes and Other Indebtedness..........................37
---------------------------------------
6.06 Insurance........................................................37
---------
6.07 Maintenance of Property..........................................40
-----------------------
6.08 Performance of Obligations.......................................40
--------------------------
6.09 ERISA............................................................40
-----
6.10 Use of Proceeds..................................................41
---------------
6.11 Financial Covenants..............................................41
-------------------
SECTION 7 NEGATIVE COVENANTS................................................41
------------------
7.01 Indebtedness.....................................................41
------------
7.02 Liens............................................................42
-----
7.03 Guaranty Obligations.............................................42
--------------------
7.04 Nature of Business...............................................42
------------------
7.05 Consolidation, Merger, Sale or Purchase of Assets, etc. .........42
------------------------------------------------------
7.06 Advances, Investments and Loans..................................42
-------------------------------
7.07 Transactions with Affiliates.....................................43
----------------------------
7.08 Operating Lease Obligations......................................43
---------------------------
7.09 Limitation on Further Negative Pledges...........................43
--------------------------------------
7.10 Project Contracts................................................43
-----------------
7.11 Restricted Payments..............................................43
-------------------
7.12 Environmental Issues.............................................43
--------------------
7.13 Subsidiaries.....................................................44
------------
SECTION 8 EVENTS OF DEFAULT.................................................44
-----------------
8.01 Events of Default................................................44
-----------------
SECTION 9 AGENCY PROVISIONS.................................................48
-----------------
9.01 Appointment......................................................48
-----------
9.02 Delegation of Duties.............................................48
--------------------
9.03 Exculpatory Provisions...........................................48
----------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C> <C>
9.04 Reliance on Communications...................................... 49
--------------------------
9.05 Notice of Default............................................... 49
-----------------
9.06 Non-Reliance on Agent and Other Lenders......................... 49
---------------------------------------
9.07 Indemnification................................................. 50
---------------
9.08 Agent in its Individual Capacity................................ 50
--------------------------------
9.09 Successor Agent................................................. 51
---------------
SECTION 10 MISCELLANEOUS................................................... 51
-------------
10.01 Notices......................................................... 51
-------
10.02 Right of Set-Off................................................ 52
----------------
10.03 Benefit of Agreement............................................ 52
--------------------
10.04 No Waiver; Remedies Cumulative.................................. 53
------------------------------
10.05 Payment of Expenses, etc........................................ 54
------------------------
10.06 Amendments, Waivers and Consents................................ 55
--------------------------------
10.07 Counterparts.................................................... 55
------------
10.08 Headings........................................................ 56
--------
10.09 Survival........................................................ 56
--------
10.10 Governing Law: Submission to Jurisdiction: Venue................ 56
------------------------------------------------
10.11 Severability.................................................... 57
------------
10.12 Entirety........................................................ 57
--------
10.13 Survival........................................................ 57
--------
10.14 Effectiveness................................................... 57
-------------
</TABLE>
<PAGE>
SCHEDULES
Schedule 1.01(a) Lender Information
Schedule 1.01(b) Applicable Margin
Schedule 1.01(c) Description of the Project
Schedule 5.10 Litigation
Schedule 5.22 Recordings and Filings
Schedule 5.25 Hazardous Materials
Schedule 7.01(a) Indebtedness
Schedule 7.02 Permitted Liens
EXHIBITS
Exhibit 2.02 Form of Notes
Exhibit 2.05 Form of Notice of Extension/Conversion
Exhibit 3.04(f) Form of U.S. Tax Compliance Certificate
Exhibit 4.02(a) Form of Assignment and Acceptance
Exhibit 4.02(b) Form of Assignment and Assumption Agreement
Exhibit 6.01(d) Form of Borrower Certificate
Exhibit 8.01(iv)(A) Form of Assignment Agreement
Exhibit 8.01(iv)(B) Form of Consent and Agreement
iv
<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of March 27, 1997 (the
"Loan Agreement"), is among GULF STATES TRANSMISSION SYSTEMS, INC., a Delaware
--------------
corporation (the "Borrower"), the several banks and other financial institutions
--------
from time to time parties to this Agreement (the "Lenders") and NATIONSBANK,
-------
N.A. (formerly known as NationsBank, N.A. (Carolinas)), a national banking
association, as agent for the Lenders hereunder (in such capacity, the "Agent").
-----
W I T N E S S E T H:
-------------------
WHEREAS, Gulf States FiberNet, a Georgia general parntership ("FiberNet"),
--------
the Agent and the Lenders identified therein are parties to a Loan Agreement
dated as of July 25, 1995 (as amended and modified prior to the Effective Date
(as defined in Section 1.01), the "Prior Agreement");
---------------
WHEREAS, the Agent as of the Effective Date and after giving effect to the
Assignment and Acceptances (as defined in Section 1.01) will be the sole Lender
party to the Prior Agreement;
WHEREAS, the Borrower as of the Effective Date will have assumed all of
FiberNet's rights and obligations under the Prior Agreement pursuant to the
terms of the Assignment and Assumption Agreement (as defined in Section 1.01);
WHEREAS, the Borrower has expressed its desire to refinance amounts owing
under the Prior Agreement and has requested that the Lenders provide on the
Effective Date a term loan in an aggregate amount of $41,600,000 pursuant to the
terms hereof;
WHEREAS, the Borrower will use the proceeds of the term loan for the
purpose of refinancing the Project Finance Loan (as defined in Section 1.01);
WHEREAS, the Lenders have agreed to make the requested term loan to the
Borrower on the terms and conditions hereinafter set forth, such terms and
conditions to become effective on the Effective Date;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree to amend and restate the Prior Agreement in its entirety as
follows, such amendment and restatement to become effective on the Effective
Date:
<PAGE>
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.01 Definitions.
-----------
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined term herein shall not
include in the singular number the plural and in the plural the singular:
"Adjusted LIBOR Rate Reserve Percentage" means, for the Interest
--------------------------------------
Period associated with each LIBOR Loan, the percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirements (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of
the Federal Reserve System in New York City with respect to liabilities or
assets consisting of or including eurocurrency liabilities, as such term is
defined in Regulation D (or with respect to any other category of
liabilities which includes deposits by reference to which the interest rate
on LIBOR Leases is determined) having a term equal to the Interest Period
for which such Adjusted LIBOR Rate Reserve Percentage is determined.
"Affiliate" means, with respect to any Person, any other Person
---------
directly or indirectly controlling by or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation
if such Person possesses, directly or indirectly, the power (i) to vote 10%
or more of the securities having ordinary voting power for the election of
directors of such corporation or (ii) to direct or cause direction of the
management and policies of such corporation, whether through the ownership
of voting securities, by contract or otherwise.
"Agents Fee Letter" means that certain letter agreement, dated as of
-----------------
March __, 1997, between the Agent and the Borrower, as amended, modified,
supplemented, or replaced from time to time.
"Annualized Operating Cash Flow" means, for any date, (i) on or prior
------------------------------
May 31, 1997, the annualized Operating Cash Flow (calculated on a rolling
basis) for the actual months ended since October 31, 1996 (for example, on
March 31, 1997, Annualized Operating Cash Flow would equal the product of
(A) the sum of Operating Cash Flow for each of the months ended November
30, 1996, December 31, 1996, January 31, 1997, February 28, 1997 and March
31, 1997 multiplied by (B) 2.4) and (ii) after May 31, 1997, Operation Cash
Flow for the six-month period most recently ended multiplied by two.
"Applicable Margin" means, for any type of Loan, the rate per annum
-----------------
set forth under the relevant column heading on Schedule 1.01(b).
---------------
2
<PAGE>
"Assignment and Acceptances" means Assignment and Acceptance agreements,
--------------------------
substantially in the same form as Exhibit 4.02(a), dated as of the Effective
---------------
Date, one such agreement to be executed by The Fuji Bank, Limited and
NationsBank, N.A., the other such agreement to be executed by MeesPierson N.V.
and NationsBank, N.A., and each such agreement to be acknowledged by FiberNet
and the Agent under the Prior Agreement.
"Assignment and Assumption Agreement" means an Assignment and Assumption
-----------------------------------
Agreement, substantially in the same form as Exhibit 4.02(b), dated as of the
---------------
Effective Date and executed by the Borrower and FiberNet.
"Assignments" means those certain assignments executed by FiberNet in
-----------
connection with certain of the Project Contracts, each dated as of July 25, 1995
and each naming the Agent as assignee.
"Bankruptcy Code" has the meaning specified in Section 8.01(e).
---------------
"Base Rate" means the rate of interest per annum that is the greater of (i)
---------
the Prime Rate, and (ii) the Federal Funds Rate plus 0.5%.
----
"Base Rate Loan" means a Loan which bears interest based on the Base Rate.
--------------
"Bond Proceeds" means proceeds received from issuance of the Bonds, net of
-------------
customary and reasonable fees and expenses associated therewith.
"Bonds" means the Senior Notes due 2007 to be issued by ITC (Delta)
-----
DeltaCom, Inc. in an aggregate principal amount at maturity of $335,000,000.
"Business Day" means any day other than a Saturday, a Sunday, a legal
------------
holiday or a day on which banking institutions are authorized by law or other
governmental action to close in Charlotte, North Carolina; except that in the
case of LIBOR Loans, such day is also a day on which dealings between banks are
carried on in U.S. dollar deposits in the London interbank market.
"Capitalized Lease" means the obligations of a Person as lessee under
-----------------
leases that have been, or should be, characterized as capitalized leases in
accordance with Generally Accepted Accounting Principles applied on a consistent
basis.
"Cash Equivalents" means (i) securities issued or directly and fully
----------------
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (ii) U.S. dollar denominated (or
foreign currency fully hedged) time deposits, certificates of deposit,
Eurodollar time deposits, Eurodollar certificates of deposit of (x) any Lender
or (y) the First National Bank of West Point, Georgia (any such bank being an
"Approved Bank"), in each case with maturities of not more than six
3
<PAGE>
months from the date of acquisition, and, in the case of the First National Bank
of West Point, provided that no more than $500,000 is invested with such bank at
--------
any one time, (iii) commercial paper and variable or fixed rate notes issued by
any Approved Bank (or by the parent company thereof) or any variable rate notes
issued by, or guaranteed by any domestic corporation rated A-2 (or the
equivalent thereof) or better by S&P or P-2 (or the equivalent thereof) or
better by Moody's and maturing within six months of the date of acquisition and
(iv) repurchase agreements with a bank or trust company (including the Agent) or
recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States of America in while the Borrower shall have a perfected first priority
security interest (subject to no other liens or encumbrances) and having, on the
date of purchase thereof, a fair market value of at least 100% of the amount of
the repurchase obligations.
"Change of Control" means the Pledgor shall fail to own beneficially,
-----------------
directly or indirectly, 95% of the voting securities of the Borrower, other than
as a result of a public offering.
"Closing Date" means the date as of which this Loan Agreement is executed
------------
by the Borrower, the Lenders and the Agent.
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time.
"Consents" means those certain Consent and Agreements executed by
--------
FiberNet's counterparty(ies) in connection with each of the Specified Project
Contracts, each dated as of July 25, 1995 and each acknowledging an assignment
of a Project Contract to the Agent as assignee.
"Consistent Basis" or "consistent basis" means, with regard to the
----------------
application of accounting principles, accounting principles consistent in
all material respects with the accounting principles used and applied in
preparation of the financial statements previously delivered to the Agent and
referred to in Section 5.06 except as to changes required, or changes permitted
and as to which the Borrower's independent public accountants have concurred, by
Generally Accepted Accounting Principles.
"Construction Contract" means, collectively, those contracts between
---------------------
FiberNet and any third party providing construction services or other services
relating to the construction of the Project.
"Controlled Group" means (i) the controlled group of corporations as
----------------
defined in Section 414(b) of the Code and the applicable regulations thereunder,
or (ii) the group of trades or businesses under common control as defined in
Section 414(c) of the Code and the applicable regulations thereunder, of which
the Borrower is a part or may become a part.
"Default" means any event, act or condition which with notice or lapse of
-------
time, or both, would constitute an Event of Default.
4
<PAGE>
"Default Rate" has the meaning specified in Section 2.04(c).
------------
"Dollar" and "$" means dollars in lawful currency of the United States of
------ -
America.
"Effective Date" means the date on or after the Closing Date (but prior to
--------------
May 1, 1997) on which the conditions set forth in Section 4.02 have been
satisfied or waived (any such waiver to be in accordance with the terms of
Section 10.06 of the Prior Agreement) in accordance with the introductory
paragraph of Section 4.02.
"Environmental Laws" means any and all federal, state and local laws,
------------------
rules,regulations, standards and ordinances relating to or regulating
environmental conditions, the use or disposal of Hazardous Materials, or human
health or safety, including without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act, the Resource Conservation and
Recovery Act, the Clean Water Act and other analogous state and local laws,
rules and regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
-----
regulations promulgated and the rulings issued thereunder, as each is amended
from time to time.
"ERISA Affiliate" means each person (as defined in Section 3(9) of ERISA)
---------------
which together with the Borrower or any Affiliate would be deemed to be a member
of the same "controlled group" within the meaning of Section 414(b), (c) and (m)
of the Code.
"ERISA Agreement" means that certain Escrow Agreement to be entered into
---------------
among the Borrower and the Escrow Agent (as defined in the offering memorandum
relating to the Bonds) in connection with the Bonds, as the same may be amended
or modified from time to time, or, if no such agreement is executed, the terms
and conditions upon which the Escrow Agent holds the Bond Proceeds as set forth
in the offering memorandum relating to the Bonds.
"Event of Default" has the meaning specified in Section 8.
----------------
"Facilities and Services Agreement" means the Sprint Communications Company
---------------------------------
Facilities and Services Agreement dated January 26, 1995 between Sprint
Communications and Interstate FiberNet, which was assigned by Interstate
FiberNet to FiberNet in accordance with an Assignment dated as of July 25, 1995,
as the same may be amended or modified from time to time.
"FCC" means the Federal Communications Commission, and any successor agency
---
thereto.
5
<PAGE>
"Federal Funds Rate" means, for any day, the weighted average of the rates
------------------
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average quotations, for the
day, of such transactions received by the Agent from three Federal funds brokers
of recognized standing selected by it.
"Funded Debt" means, as to any Person, (i) all Indebtedness of such Person
-----------
for borrowed money, or which has been incurred in connection with the
acquisition of assets, in each case whether having a final maturity of more or
less than one year from the date of origin thereof, (ii) all Capitalized Lease
obligations of such Person, and (iii) all Guaranty Obligations and contingent
obligations, including letter of credit and purchase obligations, of such
Person.
"Generally Accepted Accounting Principles" means generally accepted
----------------------------------------
accounting principles in the United States in effect as of the date of this Loan
Agreement.
"Guaranty Obligations" means, with respect to any Person, any obligations
--------------------
(other than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations of any other Person in any
manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
other obligation or any property constituting security therefor, (ii) to advance
or provide funds or other support for the payment or purchase of such
Indebtedness or obligation or to maintain working capital, solvency or other
balance sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar agreements
or arrangements), (iii) to lease or purchase property, securities or services
primarily for the purpose of assuring the holder of such Indebtedness or
obligation, or (iv) to otherwise assure or hold harmless the owner of such
Indebtedness or obligation against loss in respect thereof. The amount of
Guaranty Obligations hereunder shall be deemed to be an amount equal to the
stated or determinable amount of the Indebtedness or obligation in respect of
which such Guaranty Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated amount in respect thereof (assuming such other
Person is required to perform thereunder) as determined in good faith.
"Hazardous Materials" means any hazardous or toxic substances, materials or
-------------------
wastes, including, but not limited to, those substances, materials or wastes (i)
designated as a "hazardous waste" pursuant to the Resource Conservation and
Recovery Act, (iii) defined as a "hazardous substance" pursuant to Section 311
of the Clean Water Act, or listed pursuant to Section 307 of the Clean Water
Act, (ii) defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act or (iv)
substances similarly defined or listed in state and local laws and regulations
regulating health, safety or the environment.
"IC Railroad" means Illinois Central Railroad Company, a Delaware
-----------
corporation.
6
<PAGE>
"IC Railroad Operating Agreement" means the Operating Agreement dated as of
-------------------------------
August 11, 1994 between FiberNet and IC Railroad, as the same may be amended or
modified from time to time.
"IC Railroad Term Agreement" means the Term Agreement dated as of August
--------------------------
11, 1994 between FiberNet and IC Railroad, as the same may be amended or
modified from time to time.
"Indebtedness" means without duplication, (i) all indebtedness for borrowed
------------
money, (ii) the deferred purchase price of assets or services which in
accordance with Generally Accepted Accounting Principles would be shown to be a
liability (or on the liability side of a balance sheet), (iii) all Guaranty
Obligations, (iv) the maximum amount of all letters of credit issued or
acceptance facilities established for the account of such Person and, without
duplication, all drafts drawn thereunder (other than letters of credit (x)
supporting other Indebtedness of the Person or (y) offset by a like amount of
cash or government securities held in escrow to secure such letter of credit and
draws thereunder), (v) all Capitalized Lease obligations, (vi) all indebtedness
of another Person secured by any lien or any property of the Person, whether or
not such indebtedness has been assumed, (vii) all obligations under take-or-pay
or similar arrangements (but excluding operating lease obligations of the
Borrower covered under Section 7.08) or under interest rate, currency, or
commodities agreements, (viii) indebtedness created or arising under any
conditional sale or title retention agreement, (ix) all obligations of the
Person that may arise under swap or similar interest rate hedge agreements
entered into with a party other than NationsBank, N.A. (or its predecessor,
NationsBank, N.A. (Carolinas)) and (x) withdrawal liability or insufficiency
under ERISA or under any qualified plan or related trust, but specifically
excluding from the foregoing trade payables and accrued expenses arising or
incurred in the ordinary course of business.
"Interest Charges" means, for any period, all interest and amortization of
----------------
debt discount and expense on any particular indebtedness for which such
calculations are being made.
"Interest Coverage Ratio" means, at any date, the ratio of (i) Annualized
-----------------------
Operating Cash Flow of the Borrower for such period to (ii) the annualized
aggregate amount of interest due and payable by the Borrower with respect to
Total Debt during the period used to calculate Annualized Operating Cash Flow
pursuant to clause (i) above.
"Interest Expense" means, for any period, the excess of (i) gross interest
----------------
expense for such period, determined in conformity with Generally Accepted
Accounting Principles, over (ii) the sum of (a) interest income and (b) to the
extent not included in the determination of such gross interest expense, the
expensing of upfront costs or fees for such period associated with the execution
and delivery of this Loan Agreement.
"Interest Payment Date" means (i) as to LIBOR Loans, the last day of each
---------------------
Interest Period, or where the applicable Interest Period is more than 90 days,
then the date
7
<PAGE>
3 months from the beginning of the Internet Period and each 3 months thereafter,
and (ii) as to Base Rate Loans, the first day of each calendar quarter beginning
with the first of such dates to occur after the month of the Effective Date and
continuing until the Loans are paid in full. If an Interest Payment Date falls
on a date which is not a Business Day, such Interest Payment Date shall be
deemed to be the next succeeding Business Day, except that in the case of LIBOR
Loans where the next succeeding Business Day falls in the next succeeding
calendar month, then on the next preceding Business Day.
"Interest Period" means, as to LIBOR Loans, a period of one, two or
---------------
three month's duration, as the Borrower may elect, commencing in each case, on
the Effective Date: provided, however, (A) is any Interest Period would end on
-------- -------
a day which is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day (except that in the case of LIBOR Loans where the
next succeeding Business Day falls in the next succeeding calendar month, then
on the next preceeding Business Day), (B) no Interest Period shall extend beyond
the Maturity Date, and (C) in the case of LIBOR Loans, where an Interest Period
begins on a day for which there is no numerically corresponding day in the
calendar month in which the Interest Period is to end, such Interest Period
shall end on the last day of such calendar month.
"Interstate FiberNet" means Interstate FiberNet, a Georgia general
-------------------
partnership.
"Kansas City Southern" means Kansas City Southern Railway Company, a
--------------------
Missouri corporation.
"Kansas City Southern Operating Agreement" means the Operating Agreement
----------------------------------------
dated as of August 17, 1994 by and between FiberNet and Kansas City Southern, as
the same may be amended or modified from time to time.
"Lender Percentage" means, with respect to each Lender, the percentage
-----------------
of the Loans provided by such Lender, as set forth on Schedule 1.01(a).
----------------
"Lending Office" means, as to any Lender, its office located at its
--------------
address set forth on Schedule 1.01(a).
----------------
"LIBOR Loan" means a Loan which bears interest based on LIBOR.
----------
"LIBOR" means, for any LIBOR Loan for any Interest Period therefor, an
-----
interest rate per annum equal to the rate obtained by dividing (a) the rate per
annum (rounded upward, if necessary, to the nearest 1/100,000 of 1%) appearing
on Telerate Page 3750 (or any successor page) as the London interbank offered
rate for deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period (provided that if more than one rate is
--------
specified on Telerate Page 3750, the applicable rate shall be the arithmetic
mean of all such rates); provided, however, that if for any reason such rate is
-------- -------
not available, the term "LIBOR" shall mean, for any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upward, if necessary, to the
nearest 1/100,000 of
8
<PAGE>
1%) appearing on Renters Screen LIBO Page (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period (provided that if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates), by (b) a percentage equal to 100% minus
the Adjusted LIBOR Rate Reserve Percentage for such Interest Period.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the Uniform Commercial Code
as adopted and in effect in the relevant jurisdiction, or other similar
recording or notice statute, and any lease in the nature thereof).
"Loan" or "Loans" shall have the meanings given to such terms in Section
----
2.01 hereof.
"Loan Documents" means this Loan Agreement, the Notes, the Pledge and
--------------
Security Agreement, the Security Agreement, the Assignments,the Consents, the
Assignment and Assumption Agreement, the Swap Documents and the Project
Contracts.
"Material Adverse Effect" means, as to any party, a material adverse
-----------------------
effect on (i) the operations or financial condition of such party, (ii) the
ability of such party to perform its obligations under this Loan Agreement, or
(iii) the validity or enforceability of any of the Loan Documents or the rights
and remedies of the Lenders thereunder.
"Material Default" means (i) any happening which would immediately or
----------------
with the passage of time give Sprint Communications a right to terminate the
Telecommunications System Agreement and (ii) any happening which would create a
default under such agreement and materially affect the construction, maintenance
or operation of the fiber optic system which is the subject of such agreement.
"Maturity Date" means the earlier of (i) the date on which all of the
-------------
Bond Proceeds have been Released from Escrow and (ii) September 30, 1997;
provided, however, that if the Bonds are outstanding on September 30, 1997 and
- -------- -------
all of the Bond Proceeds have not been Release from Escrow as of such date,
"Maturity Date" shall mean the earlier of (a) the date on which all of the Bond
Proceeds have been Released from Escrow and (b) December 31, 1997.
"Moody's" means Moody's Investors service, Inc., and any successor
-------
thereof.
"Multiemployer Plan" means at any time an employee pension benefit plan
------------------
that is a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA
to which any member of the Controlled Group is then making or accruing an
obligation to make
9
<PAGE>
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
Controlled Group during such five year period.
"Net Income" means, for any period, the net earnings (or net loss) of
----------
Borrower in each case determined in accordance with Generally Accepted
Accounting Principles applied on a consistent basis.
"Note" or "Notes" shall have the meanings given to such terms in Section
----
2.02 hereof.
"Operating Cash Flow" means, for any Person for any period, the sum of (i)
-------------------
Net Income for such period taken as a single accounting period plus (ii) the sum
of the following amounts for such period to the extent included in the
determination of such Net Income, without duplication: (a) depreciation expense,
(b) amortization expense and other non-cash charges reducing income, (c)
Interest Expense and (d) total income tax expense.
"PBGC" means the Pension Benefit Guaranty Corporation established under
----
ERISA, and any successor thereto.
"Permitted Indebtedness" means (i) trade payables, (ii) that indebtedness
----------------------
set forth on Schedule 7.01(c) hereto and (iii) that indebtedness disclosed in
----------------
the financial statements delivered to the Agent pursuant to Section 5.06.
"Permitted Investments" means (i) cash and Cash Equivalents; (ii)
---------------------
receivables owing to the Borrower or any of its receivables and advances to
suppliers, in each case if created, acquired or made in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(iii) intercompany Indebtedness, in an aggregate amount not to exceed $500,000
at any time outstanding, as set forth on Schedule 7.01(a) hereto or as disclosed
----------------
in the financial statements delivered to the Agent pursuant to Section 5.06;
(iv) loans and advances (in addition to advances to employees for
business-related travel expenses, moving expenses and other similar expenses, in
each case incurred in the ordinary course of business) to employees in an
aggregate amount not to exceed $100,000 at any time outstanding; (v) investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers; and (vi)
additional loan advances and/or investments of a nature not contemplated by the
foregoing clauses (iv) or (v) hereof, provided that such loans, advances and/or
--------
investments made pursuant to this clause (vi) shall not exceed $100,000 in the
aggregate at any time outstanding.
"Permitted Liens" means (i) Liens created by, under or in connection with
---------------
this Loan Agreement or the other Loan Documents in favor of the Leaders; (ii)
Liens described on Schedule 7.02 attached hereto; (iii) Liens for taxes not yet
-------------
due or Liens for taxes being contested in good faith by appropriate proceedings
for which adequate
10
<PAGE>
reserves determined by the Agent in its reasonable discretion have been
established (and as to which the property subject to such lien is not yet
subject to foreclosure, sale or loss on account thereof); (iv) Liens in respect
of property imposed by law arising in the ordinary course of business such as
materialmen's, mechanics', warehousemen's and other like Liens provided that
such Liens secure only amounts not yet due and payable; (v) pledges or deposits
made to secure payment of worker's compensation insurance, unemployment
insurance, pensions or social security programs; (vi) Liens arising from good
faith deposits in connection with or to secure performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations incurred in
the ordinary course of business (other than obligations in respect of the
payment of borrowed money); and (vii) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or irregularities in title and
other similar charges or encumbrances not, in any material respect, impairing
the use of such property for its intended purposes or interfering with the
ordinary conduct of business of the Borrower taken as a whole.
"Person" means any individual, partnership, joint venture, firm,
------
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" means any Multiemployer Plan or any single-employer plan as defined
----
in Section 4001(a)(15) of ERISA, which is maintained, or at any time during the
five calendar years preceding the date of this Loan Agreement was maintained,
for employees of the Borrower or an ERISA Affiliate.
"Pledge and Security Agreement" means that certain Pledge and Security
-----------------------------
Agreement between the Pledgor and the Agent of even date herewith, as the same
may be amended or modified from time to time.
"Pledgor" means ITC Holding Company, Inc., a Delaware corporation.
-------
"Prior Agreement" has the meaning specified in the Recitals hereof.
---------------
"Prime Rate" means the rate of interest per annum publicly announced from
----------
time to time by the Agent as its prime rate in effect at its principal office in
Charlotte, North Carolina; each change in the Prime Rate shall be effective on
the date such change is publicly announced as effective. The Prime Rate is not
necessarily the Agent's lowest or best rate of interest.
"Project" means the fiber optic transmission system described on Schedule
------- --------
1.01(c).
- -------
"Project Contract Default" shall have the meaning set forth in Section
------------------------
4.01(a).
"Project Contracts" means all of the material contracts relating to the
-----------------
Project, including without limitation the Telecommunications System Agreement,
the
11
<PAGE>
Telecommunications System Maintenance Agreement, the Facilities and Services
Agreement, the Specifications for Maintenance of Fiber Regenerator Sites, the
Use and Non-Disclosure Agreement, the IC Railroad Operating Agreement, the IC
Railroad Term Agreement, the Southern Electric System Fiber Optic Facilities
Agreement, the Kansas City Southern Operating Agreement, the Construction
Contract, the Fiber Optic Facility Lease Agreement between Southern Telecom 1
and FiberNet (originally signed by Interstate FiberNet and assigned effective
the same day to FiberNet) dated as of January 31, 1997, the Fiber System Lease
Agreement between CSW Communications, Inc. and FiberNet dated as of January 30,
1996, the Network Operating Agreement among FiberNet, TriNet, Inc., Hart
Communications, Inc. and SCANA Communications, Inc. (f/k/a MPX Systems, Inc.)
dated March 25, 1996, the agreement relating to the Longview, Texas to Dallas,
Texas spur of the Project (if and when such agreement is executed), any sub-
capacity contracts and any easement agreements or leases with respect to real
property utilized in connection with the Project.
"Project Finance Loan" means that certain $47,500,000.00 loan made by the
--------------------
Lenders to FiberNet pursuant to the Prior Agreement.
"Project Parties" means every party to a Project Contract.
---------------
"Property" means all property leased, owned or otherwise used in connection
--------
with the Project.
"Regulation D" means Regulation D of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing reserve requirements.
"Regulation G" means Regulation G of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation X" means Regulation X of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Released from Escrow" means all of the conditions and prerequisites for
--------------------
disbursement of all or a portion of the Bond Proceeds under the Escrow Agreement
have been satisfied and all or such portion of the Bond Proceeds, as applicable,
have been released to the Borrower or an Affiliate of the Borrower.
12
<PAGE>
"Reportable Event" is a reportable event as defined in Section 4043(b) of
----------------
ERISA for which there is no available administrative or statutory waiver from
the reporting requirement set out in Section 4043(a) of ERISA.
"Required Lenders" means Lenders whose aggregate pro rata share of the
----------------
Loans constitutes more than 66-2/3% of the aggregate amount of the Loans.
"Restricted Payment" means (i) any dividend or other distribution, direct
------------------
or indirect, on account of any shares of any class of stock of the Borrower,
now or hereafter outstanding, (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of stock of the Borrower, now or hereafter outstanding,
(iii) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of the
Borrower, now or hereafter outstanding, and (iv) any payment or prepayment of
principal of, premium, if any, or interest on, redemption, purchase, retirement,
defeasance, sinking fund, or similar payment with respect to, any subordinated
or intercompany Indebtedness.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
---
Company, Inc., and any successor thereof.
"Security" means (a) all assets of the Borrower, including, without
--------
limitation, the Borrower's interest in the fiber optics transmission line and
associated electronic and other equipment comprising the Project, the Project
Contracts and other agreements pertaining to the Project, all present and future
accounts of the Borrower (including, without limitation, all rights of the
Borrower under the Swap Documents) and the Borrower's interest in all insurance
policies, permits and easements relating to the Project and (b) a pledge of the
Pledgor's stock in the Borrower.
"Security Agreement" means that certain Amended and Restated Security
------------------
Agreement between the Borrower and the Agent, executed of even date herewith, as
the same may be amended or modified from time to time.
"Single Employer Plan" means a Plan that is not a Multiemployer Plan.
--------------------
"Southern Development" means Southern Development and Investment Group,
--------------------
Inc., a Georgia corporation.
"Southern Electric System. Fiber Optic Facilities Agreement" means the
----------------------------------------------------------
Revised and Restated Fiber Optic Facilities and Services Agreement dated as of
June 9, 1995 by and between Southern Development, 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 to FiberNet pursuant to an Assignment
dated as of July 25, 1995, as the same may be amended or modified from time to
time.
13
<PAGE>
"Specifications for Maintenance of Fiber Regenerator Sites" means
---------------------------------------------------------
the Specifications for Maintenance of Fiber Regenerator Sites, which was
assigned by Interstate FiberNet to FiberNet pursuant to an Assignment dated as
of March 21, 1995, setting forth Interstate FiberNet's performance obligations
regarding all regenerator sites along the fiber cable route from Atlanta,
Georgia, to Shreveport, Louisiana, as the same may be amended or modified from
time to time.
"Specified Project Contracts" means the Telecommunications System
---------------------------
Agreement, the Telecommunications System Maintenance Agreement, the Facilities
and Services Agreement, the Specifications for Maintenance of Fiber Regenerator
Sites, the Use and Non-Disclosure Agreement, the IC Railroad Operating
Agreement, the IC Railroad Term Agreement, the Southern Electric System Fiber
Optic Facilities Agreement and the Kansas City Southern Operating Agreement.
"Specified Project Parties" means every party to a Specified
-------------------------
Project Contract.
"Sprint Communications" means Sprint Communications Company L.P., a
---------------------
Delaware limited partnership, its successors and assigns.
"Subsidiary" of a Person means (i) any corporation more than 50% of
----------
whose stock of any class or classes having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation (irrespective of
whether or not at the time, any class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time owned by such Person directly or indirectly through Subsidiaries, and
(ii) any partnership, association, joint venture or other entity in which such
person directly or indirectly through Subsidiaries has more than a 50% equity
interest at any time.
"Substantial Loss" means, with respect to the Project, any damage to, or
----------------
loss suffered by, the Project that results in either (i) a 25% or greater
decrease in the value of the Project or (ii) a repair cost of more
than $5,000,000.
"Swap Breakage Costs" means "Losses" as defined in the Swap Documents.
-------------------
"Swap Documents" means the ISDA Master Agreement, the Schedule and the
--------------
Confirmation thereto, each dated as of January 17, 1995 between FiberNet and
NationsBank, N.A. (formerly known as NationsBank, N.A. (Carolinas)) relating to
interest rate swap transactions, as the same may be amended or modified from
time to time.
"Telecommunications System Agreement" or "TSA" means the
----------------------------------- ---
Telecommunications System Agreement dated January 26, 1995 between Interstate
FiberNet and Sprint Communications, which was assigned by Interstate FiberNet to
FiberNet pursuant to that certain Assignment of Contract dated as of March 21,
1995 from the Interstate FiberNet to FiberNet and that certain Assumption dated
as of March 21,
14
<PAGE>
1995 by FiberNet accepting such Assignment of Contract, as the same may be
amended or modified from time to time.
"Telecommunications System Maintenance Agreement" or "TSMA" means the
----------------------------------------------- ----
Telecommunications System Maintenance Agreement dated as of January 26,
1995 between Interstate FiberNet and Sprint Communications, which was
assigned by Interstate FiberNet to FiberNet pursuant to an Assignment dated
as of July 25, 1995, as the same may be amended or modified from time to
time.
"Total Debt" means, at any date, the aggregate Indebtedness of the
----------
Borrower for borrowed money (including any overdue interest on such
indebtedness but excluding any accrued but not overdue interest on such
indebtedness), at such date.
"Total Leverage Ratio" means, at any date, the ratio of Total Debt on
--------------------
such date to Annualized Operating Cash Flow of the Borrower on such date.
"Total Liabilities" means all items which in accordance with Generally
-----------------
Accepted Accounting Principles would be classified as liabilities on a
balance sheet of any Person, and including specifically, without
limitation, Capitalized Lease obligations.
"Use and Non-Disclosure Agreement" means the Agreement for Use and
--------------------------------
Non-Disclosure of Confidential Information dated as of January 26, 1995
between Interstate FiberNet and Sprint Communications, which was assigned
by Interstate FiberNet to FiberNet pursuant to an Assignment dated as of
July 25, 1995, as the same may be amended or modified from time to time.
1.02 Computation of Time Periods.
---------------------------
For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
1.03 Accounting Terms.
----------------
Accounting terms used but not otherwise defined herein shall have the
meanings provided, and be construed in accordance with, Generally Accepted
Accounting Principles.
1.04 Agreements Modified.
-------------------
References herein to any contract or agreement means such contract or
agreement as amended, modified, extended or replaced from time to time as herein
permitted.
15
<PAGE>
SECTION 2
THE LOANS
---------
2.01 Term Loan Commitment.
--------------------
Subject to and upon the terms and conditions and relying upon the
representations and warranties herein set forth, the Lenders severally agree to
make a term loan to the Borrower on the Effective Date in the amount of
FORTY-ONE MILLION SIX HUNDRED THOUSAND DOLLARS ($41,600,000)(the "Term Loan").
---------
The Term Loan may from time to time consist of LIBOR Loans or Base Rate Loans
(collectively, "Loans" and each a "Loan"), or a combination thereof, as
----- ----
determined by the Borrower and notified to the Agent in accordance with Section
2.05 hereof. Amounts repaid on the Term Loan may not be reborrowed.
2.02 Term Loan Notes.
---------------
The Term Loan shall be evidenced by duly executed promissory notes of
the Borrower to each Lender dated as of the Closing Date in original principal
amounts equal to the Term Loan amount multiplied by each Lender's Lender
Percentage and substantially in the form of Exhibit 2.02 (such promissory notes,
----
as amended, modified, extended, renewal or replaced from time to time, the
"Notes"). The Notes shall (a) be dated the Closing Date, (b) be stated to
-----
mature in accordance with Section 2.03 hereof, and (c) provide for the payment
of interest in accordance with Section 2.04 hereof.
2.03 Repayment of Principal.
----------------------
The principal amount of each Note shall mature in one installment
payable on the Maturity Date.
2.04 Interest.
--------
(a) Subject to the provisions of paragraph 2.04(c) hereof,
each LIBOR Loan shall bear interest at a rate per annum (computed on the basis
of the actual number of days elapsed over a year of 360 days) equal to LIBOR for
the Interest Period in effect for such LIBOR Loan plus the Applicable Margin.
----
(b) Subject to the provisions of paragraph 2.04(c) hereof,
each Base Rate Loan shall bear interest at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 365 days) equal to
the Base Rate plus the Applicable Margin.
----
(c) If all or a portion of (1) the principal amount of any
Loan, (2) any interest payable thereon or (3) any fee or other amount payable
hereunder shall not be paid when due (whether at stated maturity, by
acceleration or otherwise), such overdue amount, to the extent permitted by law,
shall bear interest at a per annum rate equal to two percent (2%) in excess of
the rate otherwise applicable hereunder (the "Default Rate").
------------
16
<PAGE>
(d) Interest shall be payable in arrears on each Interest
Payment Date; provided, however, that interest accruing on overdue
-----------------
amounts pursuant to paragraph 2.04(c) hereof shall be payable on demand.
2.05 Election of Loan Type.
---------------------
The Borrower shall have the option, on any Business Day, to extend
existing Loans into a subsequent Interest Period or to convert Loans into Loans
of another type; provided, however, that (i) all conditions precedent to the
-------- -------
making of loans specified in Section 4.01 hereof must be satisfied, (ii) except
as provided in Section 3.01(iii), LIBOR Loans may be converted into Base Rate
Loans only on the last day of an Interest Period applicable thereto, (iii) LIBOR
Loans may be extended, and Base Rate Loans may be converted into LIBOR Loans,
only if no Default or Event of Default is in existence on the date of extension
or conversion, (iv) Loans extended as, or converted into, LIBOR Loans shall be
in a minimum amount of $1,000,000 or such lesser amount as is bearing interest
ar the Base Rate; provided, however, the Borrower shall be entitled to have one
-------- -------
LIBOR Loan in an amount of less than $100,000 outstanding at any time whether or
not such LIBOR Loan was previously bearing interest at the Base Rate, and (v)
any request for extension or conversion of a LIBOR Loan which shall fail to
specify an Interest Period shall be deemed to be a request for an Interest
Period of one month. Each such extension or conversion shall be effected by the
Borrower by giving written notice (or telephonic notice promptly confirmed in
writing) to the Agent (including requests for extensions and renewals, a "Notice
------
of Extension/Conversion"), substantially in the form of Exhibit 2.05, prior to
- ----------------------- ------------
10:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case
of Base Rate Loans, and on the third Business Day Prior to, in the case of LIBOR
Loans, the date of the proposed extension or conversion, specifying the date of
the proposed extension or conversion, the Loans to be so extended or converted,
the types of Loans into which such Loans are to be converted and, if
appropriate, the applicable Interest Periods with respect thereto. Each request
for extension or conversion shall be deemed to be a reaffirmation by the
Borrower that no Default or Event of Default then exists and is continuing and
that the representations and warranties set forth in Section 5 are true and
correct in all material respects (except to the extent they relate to an earlier
period). In the event the Borrower fails to request extension or conversion of
my LIBOR Loan in accordance with this Section, or any such conversion or
extension is not permitted or required by this Section, then such Loans shall be
automatically converted into Base Rate Loans at the end of their Interest
Period.
2.06 Prepayments.
-----------
(a) Voluntary Prepayments. The Borrower shall have the right
--------- -----------
to prepay Loans in whole or in part from time to time without premium or
penalty; provided, however, that (A) LIBOR Loans may only be prepaid without
-------- -------
penalty on the last day of an Interest Period applicable thereto or at the
option of the Borrower at any other time subject to Section 3.03 hereof and (B)
each such partial prepayment shall be a minimum principal amount of $500,000 (or
the amount then outstanding, if less).
<PAGE>
(b) Notice of Voluntary Prepayment. The Borrower will provide notice
------------------------------
to the Agent of any voluntary prepayment by 10:00 a.m. (Charlotte, North
Carolina time) on a date at least five days prior to the prepayment.
(c) Mandatory Prepayments. The Term Loan shall be immediately
---------------------
prepaid and permanently reduced with 100% of the cash proceeds (net of
customary and reasonable related costs and expenses) received by the
Borrower (or, in the case of subclause (iv) below, any of its Affiliates)
from any of the following:
(i) the sale of assets other than in the ordinary course of
business;
(ii) the public or private issuance of indebtedness (other
than trade payables);
(iii) the public or private issuance of equity securities; and
(iv) Bond Proceeds that have been Released from Escrow.
(d) General. All prepayments made pursuant to this Section 2.06
-------
shall (i) be subject to Section 3.03 and (ii) unless the Borrower shall
specify otherwise, be applied first to Base Rate Loans, if any, and then to
LIBOR Loans in inverse order of maturity. Amounts prepaid may not be
reborrowed.
SECTION 3
ADDITIONAL PROVISIONS REGARDING LOANS
-------------------------------------
3.01 Increased Costs, Illegality, etc.
--------------------------------
In the event the Agent shall determine (which determination shall be final
and conclusive and binding on all the parties hereto absent manifest error)
that:
(i) Unavailability. On any date for determining the
--------------
appropriate LIBOR Rate for any Interest Period, (A) that by reason of any
changes arising on or after the date of this Loan Agreement affecting the
interbank LIBOR market, dollar deposits in the principal amount requested
are not generally available in the interbank LIBOR market or adequate and
fair means do not exist for ascertaining the applicable interest rate on
the basis provided for in the definition of LIBOR Rate, or (B) a Loan
conversion or extension request is made by the Borrower less than one (1)
month prior to the Maturity Date, then LIBOR Loans will no longer be
available (or in the case of (A) above, until such time as the Agent shall
notify the Borrower that the circumstances giving rise thereto no longer
exist), and requests for LIBOR Loans shall be deemed requests for Base Rate
Loans.
(ii) Increased Costs. At any time that any Lender shall incur
---------------
increased costs or reductions in the amounts received or receivable
hereunder with respect to any
18
<PAGE>
LIBOR Loans because of (x) any change since the date of this Loan
Agreement in any applicable law, governmental rule, regulation,
guideline or order (or in the interpretation or administration thereof
and including the introduction of any new law or governmental rule,
regulation, guideline or order) including without limitation the
imposition, modification or deemed applicability of any reserves,
deposits or similar requirements as related to LIBOR Loans (such as, for
example but not limited to, a change in official reserve requirements,
but, in all events, excluding reserves required under regulation D to
the extent included in the computation of LIBOR) and/or (y) other
circumstances affecting any Lender, the interbank LIBOR market or the
position of any Lender in such market; then the Borrower shall pay to
the Agent promptly upon written demand therefor, such additional amounts
(in the form of an increased rate of, or a different method of
calculating, interest or otherwise as the Agent may determine in its
sole discretion) as may be required to compensate the Lender(s) for such
increased costs or reductions in amounts receivable hereunder (written
notice as to the additional amounts owed to the Lender(s), showing the
basis for calculation thereof shall, absent manifest error, be final and
conclusive and binding on all parties hereto; provided, however, that
-------- -------
such determinations are made on a reasonable basis). Notwithstanding the
above, in no event shall the Borrower be obligated to any Lender for any
such additional amount to the extent such increased costs or such
reductions in the amounts received relate to the period more than ninety
(90) days prior to the Agent's notice thereof to the Borrower.
(iii) Illegality. At any time, that the making or
----------
continuance of any LIBOR Loan has become unlawful by compliance by any
Lender in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental rule,
regulation, guideline or order not having the force of law even though
the failure to comply therewith would not be unlawful), or has become
impractical as a result of a contingency occurring after the date of
this Loan Agreement which materially and adversely affects the interbank
LIBOR market; then LIBOR Loans will no longer be available, requests for
LIBOR Loans shall be deemed requests for Base Rate Loans and the
Borrower may, and upon direction of the Agent, shall, as promptly as
possible and, in any event within the time period required by law, have
any such LIBOR Loans then outstanding converted into Base Rate Loans.
3.02 Capital Adequacy.
----------------
If after the date hereof, any Lender has determined that the adoption or
effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Lender with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then
from time to time, within 15 days after demand by such Lender, the Borrower
shall pay to such Lender such
19
<PAGE>
additional amount or amounts as will compensate such Lender for such reduction.
Upon determining in good faith that any additional amounts will be payable
pursuant to this Section, such Lender will give prompt written notice thereof to
the Borrower, which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish any of the Borrower's obligations to pay additional amounts
pursuant to this Section. Determination by any such Lender of amounts owing
under this Section shall, absent manifest error, be final and conclusive and
binding on the parties hereto; provided, however, that such determinations are
-------- -------
made on a reasonable basis. Failure on the part of any Lender to demand
compensation for any period hereunder shall not constitute a waiver of such
Lender's rights to demand any such compensation in such period or in any other
period. Notwithstanding the above, in no event shall the Borrower be obligated
to any Lender for any such additional amount to the extent such reductions in
rate of return relate to the period more than ninety (90) days prior to the
Agent's notice thereof to the Borrower.
3.03 Compensation.
------------
The Borrower shall compensate the Agent or any Lender, upon written request
(which request shall set forth the basis for requesting such compensation) of
the Agent, for all reasonable losses, expenses, liabilities and Swap Breakage
Costs (including, without limitation, any loss, expense, liability or Swap
Breakage Costs incurred by reason of liquidation or reemployment of deposits or
other funds required or maintained by such Lender to fund LIBOR Loans or to
perform its obligations under the Swap Documents) which the Agent or any Lender
may sustain:
(i) if for any reason (other than a default by such Lender of
the Agent) a borrowing of LIBOR Loans does not occur on a date specified
therefor in a Notice of Extension/Conversion;
(ii) if any repayment or conversion of any LIBOR Loan occurs on
a date which is not the last day of an Interest Period applicable thereto
including without limitation in connection with any demand, acceleration or
otherwise;
(iii) if any prepayment of any LIBOR Loan is not made on any
date specified in a notice of prepayment given by the Borrower; or
(iv) as a consequence of any other default by the Borrower to
repay its Loans when required by the terms of this Loan Agreement.
Calculation of all amounts payable to any Lender under this Section shall be
made as though such Lender had actually funded any relevant LIBOR Loan through
the purchase of a LIBOR deposit bearing interest at LIBOR in an amount equal to
the amount of that Loan, having a maturity comparable to the relevant Interest
Period and in the case of LIBOR Loans, through the transfer of such LIBOR
deposit from an offshore office of such Lender to a domestic office of such
Lender in the United States of America; provided, however, that such Lender may
-------- -------
fund each of the LIBOR Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this Section. Amounts payable under this Section shall include an amount equal
to the excess, if any, of (i) the amount of interest which
20
<PAGE>
would have accrual on the amount prepaid, or not borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or continue, the Interest
Period that would have commenced on the date of such failure) in each case at
the applicable rate of interest for such LIBOR Loans provided for herein over
(ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the LIBOR market. This
Section shall survive the termination of this Loan Agreement and the payment of
the Loans and all other amounts payable hereunder.
3.04 Taxes.
-----
(a) Each payment or prepayment hereunder and under any Notes
shall be made free and clear of, and without deduction for, any present
of future withholding or other taxes, duties or charges of any nature
imposed on such payments or prepayments by or on behalf of any
governmental authority thereof or therein, except for and excluding (i)
taxes upon or determined by reference to any Lender's net income, assets
or gross receipts or (ii) franchise taxes imposed by the United States,
any political subdivision thereof or any taxing authority with respect
to any of them, or imposed by any jurisdiction number which any Lender
is organized or has a principal or registered office, or (iii) branch
profit taxes as imposed pursuant to Section 884 of the Internal Revenue
Code (and regulations thereunder) and imposed by the United States (such
excluded taxes hereinafter being referred to as the "Excluded Taxes").
--------------
If any such taxes, duties or charges (other than Excluded Taxes) are so
levied or imposed on any payment or prepayment to the Agent, the
Borrower will make additional payments in such amounts as may be
necessary so that the net amount received by the Agent, after
withholding or deduction for or on account of all such applicable taxes,
duties or charges, including deductions applicable to additional sums
payable under this Section 3.04, will be equal to the amount provided
for herein or in the Notes, provided that to the extent that the Agent
--------
or any Lender, as applicable, determines in its sole discretion that it
can, after notice to the Agent form the Borrower, though reasonable
efforts eliminate or reduce the amount of taxes payable (without
additional costs or expenses (unless the Borrower agrees to bear such
costs or expenses) or other disadvantages or risks (economic or
otherwise) to the Agent or such Lender, as applicable), it shall pursue
such efforts. Whenever any taxes, duties or charges are payable by the
Borrower or are required to be withheld by the Borrower with respect to
any payments or prepayments hereunder or under any Notes, the Borrower
shall furnish promptly to the Agent information, including originals or
certified copies of official receipts (to the extent that the relevant
governmental authority delivers such receipts), evidencing payment of
any such taxes, duties or charges so withheld or deducted. If the
Borrower fails to pay any such taxes, duties or charges when due to the
appropriate taxing authority or fails to remit to the Agent the required
information evidencing payment of any such taxes, duties or charges so
withheld or deducted, the Borrower shall indemnify the Agent for any
such applicable incremental taxes, duties, charges, interest or
penalties that may become payable by the Agent or any Lender as a result
of any such failure.
21
<PAGE>
(b) The Borrower agrees to pay any present or future stamp or documentary
taxes, any intangibles tax or any other sales, excise or property taxes, charges
or similar levies now or hereafter assessed against the Borrower, the Agent or
any Lender that arise from and are attributable to any payment made hereunder,
under any Notes or from the execution, delivery of, or otherwise with respect
to, this Loan Agreement, the Notes or other Loan Documents and any and all
recording fees relating thereto ("Other Taxes").
-----------
(c) The Borrower shall indemnify the Agent for the full amount of any
taxes (including Other Taxes), duties or charges other than Excluded Taxes
(including, without limitation, any such taxes other than Excluded Taxes imposed
by any jurisdiction on amounts payable under this Section 3.04) duly paid or
payable by the Agent or any Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto whether or not
such taxes, duties or charges or other taxes are correctly or legally asserted.
If the Agent in its sole discretion determines that such taxes, duties or
charges or Other Taxes are incorrectly or illegally asserted against the Agent
or any Lender, and the Agent has made a claim against the Borrower for such
amounts, then the Agent or such Lender shall have the obligation to seek a
refund and to deliver such refund, if received, to the Borrower. Indemnification
payments shall be made within 30 days from the date the Agent makes written
demand therefor.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 3.04 shall survive the payment in full of principal and interest
hereunder and under the Notes indefinitely.
(e) If the Agent or any Lender receives a refund in respect of any taxes
for which such payee has received payment from the Borrower hereunder or from
the Agent (when the Borrower has funded the amount of such payment), the Agent
shall promptly notify the Borrower of such refund and the Agent shall repay the
amount of such refund to the Borrower, provided that the Borrower, upon the
request of the Agent, agrees to return such refund (plus any penalties, interest
or other charges) to the Agent in the event the Agent is required to repay such
refund. The determination as to whether the Agent or any Tender has received a
refund shall be made by the Agent and such determination shall be conclusive
absent manifest error. Upon the request of the Borrower, the Agent shall provide
the Borrower with all relevant information used in making its determination.
(f) Each Lender that is not a corporation incorporated under the laws of
the United States of America, a state thereof or the District of Columbia shall:
(X)(i) on or before the date of any payment by the Borrower under this
Loan Agreement or the Notes to such Lender, deliver to the Borrower and the
Agent (A) two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as the case may
be, certifying that it is entitled to receive payments under this Loan
Agreement and any Notes without deduction or withholding of any United
States federal income taxes and
22
<PAGE>
(B) an Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be, certifying that it is entitled to an exemption
from United States backup withholding tax;
(ii) deliver to the Borrower and the Agent two further copies
of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certificates as may reasonably be requested by the
Borrower or the Agent; or
(Y) in the case of any such Lender that is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Code, (i) represent to the Borrower (for
the benefit of the Borrower and the Agent) that it is not a bank within the
meaning of Section 881(c)(3)(A) of the Code, (ii) agree to furnish to the
Borrower on or before the date of any payment by the Borrower, with a copy to
the Agent (A) a certificate substantially in the form of Exhibit 3.04(f) (any
------------
such certificate a "U.S. Tax Compliance Certificate") and (B) two accurate and
-------------------------------
complete original signed copies of Internal Revenue Service Form W-8, or
successor applicable form certifying to such Lender's legal entitlement at the
date of such certificate to an exemption from U.S withholding tax under the
provisions of Section 881(c) of the Code with respect to payments to be made
under this Loan Agreement and any Notes (and to deliver to the Borrower and the
Agent two further copies of such form on or before the date it expires or
becomes obsolete and after the occurrence of any event requiring a change in the
most recently provided form and, if necessary, obtain any extensions of time
reasonably requested by the Borrower or the Agent for filing and completing such
forms), and (iii) agree, to the extent legally entitled to do so, upon
reasonable request by the Borrower, to provide to the Borrower (for the benefit
of the Borrower and the Agent) such other forms as may be reasonably required in
order to establish the legal entitlement of such Lender to an exemption from
withholding with respect to payments under this Loan Agreement and any Notes;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Agent. Each Person that shall become a Lender or a participant
of a Lender pursuant to Section 10.03 shall, upon the effectiveness of
the related transfer, be required to provide all of the forms, certifications
and statements required pursuant to this subsection, provided that in the case
--------
of a participant of a Lender the obligations of such participant of a Lender
pursuant to this subsection (b) shall be determined as if the participant of a
Lender were a Lender except that such participant of a Lender shall furnish all
such required forms, certifications and statements to the Lender from which the
related participation shall have been purchased.
23
<PAGE>
3.05 Change of Lending Offices.
-------------------------
The Lenders agree that upon the occurrence of any event giving rise to the
operation of Section 3.01(ii) or (iii) or 3.04, they will, if requested by the
Borrower, use reasonable efforts (subject to overall policy considerations) to
designate other lending offices for any Loans affected by such event, provided
--------
that such designations are made on such terms that the Lenders and their lending
office suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of any such
Section. Except in the case of a change of lending office made at the request of
the Borrower, no change in lending office will be made if greater costs and
expenses would result under Section 3.01(ii) or (iii) or 3.04 on account of any
such change in designation. Nothing in this Section shall affect or postpone any
of the obligations of the Borrower or the rights of the Lenders provided in
Section 3.01 or 3.04.
3.06 Payments and Computations.
-------------------------
Except as otherwise specifically provided herein, all payments hereunder
shall be made to the Agent in U.S. dollars in immediately available funds at its
offices at NationsBank Corporate Center, Charlotte, North Carolina not later
than 2:00 p.m. (Charlotte, North Carolina time) on the date when due. Payments
received after such time shall be deemed to have been received on the next
succeeding Business Day. The Agent may (but shall not be obligated to) debit the
amount of any such payment which is not made by such time to any ordinary
deposit account of the Borrower maintained with the Agent (with notice to the
Borrower). The Borrower shall, at the time it makes any payment under the Loan
Agreement, specify to the Agent the Loans, fees or other amounts payable by the
Borrower hereunder to which such payment is to be applied (and in the event that
it fails so to specify, or if such application would be inconsistent with the
terms hereof, the Agent shall apply such payment in such manner as the Agent may
determine to be appropriate in respect of obligations owing by the Borrower
hereunder). The Agent will thereafter cause to be distributed promptly like
funds relating to the payment of principal, interest or fees ratably to the
Lenders in accordance with the terms of this Loan Agreement, and the Borrower
shall not be responsible for any failure of the Agent to make a distribution of
payments received pursuant to this Section 3.06. Whenever any payment hereunder
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day (subject to
accrual of interest for the period of such extension), except that in the case
of LIBOR Loans, if the extension would cause the payment to be made in the next
following calendar month, then such payment shall instead be made on the next
preceding Business Day. All payments made by the Borrower hereunder shall be
made without setoff or counterclaim. Except as expressly provided otherwise
herein, all computations of interest and fees shall be made on the basis of
actual number of days elapsed over a year of 365 days. Interest shall accrue
from and include the date of advance, but exclude the date of payment.
3.07 Pro Rata Treatment.
------------------
Except to the extent otherwise provided herein, each payment or prepayment
of principal of any Loan, each payment of interest on any Loan, and each
conversion or extension of any
24
<PAGE>
Loan, shall be allocated pro rata among the Lenders in accordance with their
respective Lender Percentages.
3.08 Sharing of Payments.
-------------------
The Lenders agree among themselves that, in the event that any Lender shall
obtain payment in respect of any Loan or any other obligation owing to such
Lender under this Loan Agreement through the exercise of a right of setoff,
banker's lien or counterclaim, or pursuant to a secured claim under Section 506
of Title 11 of the United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, in excess of its pro rata share of such payment as provided for in
this Loan Agreement, such Lender shall promptly purchase from the other Lenders
a participation in such Loans and other obligations in such amounts, and make
such other adjustments from time to time, as shall be equitable to the end that
all Lenders share such payment in accordance with their respective ratable
shares as provided for in this Loan Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
participation theretofore sold, return its share of that benefit (together with
its share of any accrued interest payable with respect thereto) to each Lender
whose payment shall have been rescinded or otherwise restored. The Borrower
agrees that any Lender so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including setoff,
banker's lien or counterclaim, with respect to such participation as fully as if
such Lender were a holder of such Loan or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Loan Agreement, if
any Lender or the Agent shall fail to remit to the Agent or any other Lender an
amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Loan Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the Lenders under this Section
to share in the benefits of any recovery on such secured claim.
3.09 Fees.
----
The Borrower agrees to pay to the Agent the fees specified in the Agent's
Fee Letter on the dates and in the amounts set forth therein.
25
<PAGE>
SECTION 4
CONDITIONS PRECEDENT
--------------------
4.01 Conditions to Closing.
---------------------
The closing of the term loan facility pursuant to this Loan Agreement is
subject in satisfaction of the following conditions (in form and substance
acceptable in the Agent):
(a) Project Contracts. Each Project Contract shall be in full force
-----------------
and effect and there shall not exist under any Project Contract any default
or event of default by the Borrower or any other Project Party or any event
which with the giving of notice or the passage of time, or both, could
constitute such a default or event of default under any Project Contract (a
"Project Contract Default").
------------------------
(b) Executed Loan Documents. Receipt by the Agent of executed
-----------------------
originals of this Loan Agreement and the other Loan Documents, together
with such financing statements as may be required by the Agent.
(c) Perfection of Security Interest. All documentation necessary to
-------------------------------
perfect a first priority interest in the Security, exclusive easements,
shall have been executed by the appropriate party or parties and delivered
to the Agent.
(d) No Default; Representations and Warranties. Receipt by the Agent
------------------------------------------
of a certificate dated the Closing Date executed by the chief financial
officer of the Borrower stating that (i) there exists no Default or Event
of Default hereunder and no default under any of the other Loan Documents,
(ii) all representations and warranties contained herein or in the other
Loan Documents are true and correct in all material respects, (iii) the
Borrower is in compliance with all covenants, affirmative and negative, set
forth herein and (iv) the Borrower is solvent.
(e) Intentionally Omitted.
(f) Corporate Documents. Receipt by the Agent of the following:
-------------------
(i) Articles of Incorporation. A certificate of
-------------------------
incorporation and all other charter documents, if any, for each of the
Borrower and the Pledgor, certified as of a recent date by the
Secretary of State of the state of its incorporation; provided,
--------
however, that, in the case of the Pledgor, if such a certificate from
-------
the Secretary of State of the state of its incorporation is not yet
available, a similar certificate as to the effectiveness of the
Pledgor's charter documents shall be provided by an officer of the
Pledgor.
(ii) Resolutions. Resolutions of each of the Borrower and the
-----------
Pledgor approving and adopting this Loan Agreement and/or the other
Loan Documents to which each is a party, the transactions contemplated
therein and
26
<PAGE>
authorizing execution and delivery thereof, in each case certified by an
officer of such party as of the Closing Date to be true and correct and in
force effect as of such date.
(iii) Bylaws. A copy of the bylaws of each of the Borrower and the
------
Pledgor, certified by an officer of each thereof as of the Closing Date to
be true and correct and in force and effect as of such date.
(iv) Good Standing. A certificate of good standing, existence or
-------------
its equivalent with respect to each of the Borrower and the Pledgor,
certified as of a recent date by the Secretary of State of such entity's
respective state of incorporation.
(v) Incumbency. A certificate as to the incumbency and specimen
----------
signature of each officer executing any Loan Documents on behalf of the Borrower
or the Pledgor.
(g) Financial Statements. Receipt by the Agent of financial statements,
--------------------
consisting of, among other things, the information described in Section 5.06,
for the Borrower in form and substance satisfactory to the Agent.
(h) Financial Condition. There shall not have occurred a change which has
-------------------
had or is likely to have a Material Adverse Effect on the Borrower since
December 31, 1996.
(i) Evidence of Insurance. Insurance in form and amount appropriate to the
---------------------
activities to be conducted by the Borrower, including property, liability and
business interruption, shall be in full force and effect. Such insurance shall
include and conform to the requirements set out in Section 6.06.
(j) Tax Returns Filed and Taxes Paid. The Borrower shall have filed all
--------------------------------
required tax returns and paid all required taxes, and no proceedings shall be
pending with respect to such tax returns filed or taxes paid.
(k) Fees. The Agent shall have received, for its own account and for the
----
accounts of the Lenders, all fees and expenses required by this Loan Agreement
or any other Loan Document to be paid on or before the Closing Date.
4.02 Conditions to Effectiveness.
---------------------------
The effectiveness of the amendment and restatement of the Prior Agreement
and the obligation of the Lenders to make the Term Loan hereunder are subject to
satisfaction of the following conditions (in form and substance acceptable to
the Agent) on or before April 30, 1997:
27
<PAGE>
(a) Assignment and Acceptances. Receipt by the Agent of executed
--------------------------
originals of Assignment and Acceptance agreements substantially in the form of
Exhibit 4.02(a), which agreements shall have been released from escrow by the
- ---------------
Assignors named therein or which otherwise shall have become effective
in accordance with the terms thereof.
(b) Assignment and Assumption Agreement. Receipt by the Agent of
-----------------------------------
executed originals of an Assignment and Assumption Agreement substantially
in the form of Exhibit 4.02(b).
---------------
(c) Project Contracts; Consents. Each Project Contract shall be
---------------------------
in full force and effect and there shall not exist a Project Contract Default.
The consents obtained by the Borrower under the Project Contracts or otherwise
in connection with (i) the Assignment and Assumption Agreement delivered
pursuant to Section 4.02(b), (ii) the dissolution of FiberNet as a partnership
and the transfer of all of FiberNet's assets to the Borrower and (iii) this
refinancing shall have been delivered to the Agent and all conditions precedent
to the effectiveness of each such consent shall have been satisfied by the
Borrower.
(d) Perfection of Security Interest. All documentation delivered
-------------------------------
to the Agent pursuant to Section 4.01(c) and any other documentation necessary
to perfect a first priority security interest in the Security, excluding
easements, shall have been filed and recorded in each appropriate jurisdiction,
including without limitation those filings set forth on Schedule 5.22.
-------------
(e) No Default; Representations and Warranties. Receipt by the Agent
------------------------------------------
of (x) a certificate dated the Effective Date executed by the chief financial
officer of the Borrower stating that, both at the time of the making of the Term
Loan and after giving effect thereto, (i) there exists no Default or Event of
Default hereunder and no default under any of the other Loan Documents, (ii) all
representations and warranties contained herein or in the other Loan Documents
are true and correct in all material respects, (iii) the Borrower is in
compliance with all covenants, affirmative and negative, set forth herein and
(iv) the Borrower is solvent and (y) such evidence of the foregoing as the Agent
may request.
(f) Opinions of Counsel. Receipt by the Agent of an opinion (or
-------------------
opinions) of counsel in form and substance satisfactory to the Agent, addressed
to the Agent on behalf of the Lenders and dated as of the Effective Date from
counsel to the Borrower.
(g) Financial Condition. There shall not have occurred a change
-------------------
which has had or is likely to have a Material Adverse Effect on the Borrower
since December 31, 1996.
28
<PAGE>
SECTION 5
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby represents and warrants to the Lenders that:
5.01 Organization and Good Standing.
------------------------------
The Borrower is a corporation duly formed, validly existing and in good
standing under the laws of the State of its formation, and has taken all
necessary actions to be duly qualified and in good standing as a foreign
corporation authorized to do business in every jurisdiction where the failure to
so qualify would have a Material Adverse Effect on such corporation, and has
the requisite power and authority to own its properties and to carry on its
business as now conducted and as proposed to be conducted. The Borrower's
principal place of business has been correctly identified to the Agent in
writing.
5.02 Due Authorization.
-----------------
The Borrower (i) has the power and requisite authority to execute,
deliver and perform this Loan Agreement and the other Loan Documents to which it
is a party and (ii) is duly authorized, and has been authorized in all necessary
action, to execute, deliver and perform this Loan Agreement and the other Loan
Documents to which it is a party.
5.03 No Conflicts.
------------
Neither the execution and delivery of the Loan Documents by the
Borrower, nor the consummation of the transactions contemplated therein by the
Borrower, nor performance of and compliance with the terms and provisions
thereof by the Borrower will (i) violate or conflict with any provision of its
documents of formation, (ii) violate, contravene or materially conflict with any
law, regulation (including without limitation Regulation U or Regulation X),
order, writ, judgement, injunction, decree or permit applicable to it, (iii)
violate, contravene or materially conflict with contractual provisions of, or
cause an event of default under, any indenture, loan agreement, mortgage, deed
of trust, contract or other agreement or instrument to which it is a party or by
which it may be bound, (iv) result in or require the creation of any lien,
security interest or other charge or encumbrance (other than those contemplated
in or in connection with the Loan Documents) upon or with respect its
properties, the violation of which would or might have a Material Adverse Effect
on the condition (financial or otherwise), operations or properties of the
Borrower.
5.04 Consents.
--------
No consent, approval, authorization or order of, or filing, registration
or qualification with, any court or governmental authority or third party is
required in connection with the execution, delivery or performance by the
Borrower of this Loan Agreement or any of the other Loan Documents or for the
performance of or enforceability of each of the Project Contracts.
29
<PAGE>
5.05 Enforceable Obligations.
-----------------------
This Loan Agreement and the other Loan Documents executed by the Borrower
have been duly executed and delivered by the Borrower, and constitute legal,
valid and binding obligations of the Borrower, enforceable in accordance with
their respective terms, except as may be limited by bankruptcy or insolvency
laws or similar laws affecting creditors rights generally.
5.06 Financial Condition.
-------------------
The financial statements and financial information provided to the Agent,
consisting of, among other things, (i) a balance sheet of the Borrower dated as
of December 31, 1996, together with related statements of income, certified by
certified public accountants reasonably acceptable to the Agent, and (ii)
company-prepared statements of the balance sheet of the Borrower dated as of
December 31, 1996, together with related statements of income, are true and
correct and fairly represent the financial condition of the Borrower as of such
respective dates; such financial statements were prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as noted herein); and since the date of such financial statements there have
occurred no changes or circumstances which have had or are likely to have a
Material Adverse Effect on the Borrower.
5.07 No Default.
----------
No Default, Event of Default or Project Contract Default has occurred
and is continuing.
5.08 Liens.
-----
Except for Permitted Liens, the Borrower has good and marketable title to
all of its properties and assets free and clear of all liens, encumbrances,
mortgages, pledges, security interests and other adverse claims of any nature.
5.09 Indebtedness.
------------
The Borrower has no Indebtedness (including without limitation Guaranty
Obligations, reimbursement or other contingent obligations) except for Permitted
Indebtedness, and it is not in default under any instrument creating or
evidencing such Indebtedness.
5.10 Litigation.
-----------
Except as disclosed in Schedule 5.10 there are no actions, suits or legal,
-------------
equitable, arbitration or administrative proceedings pending, or to the
knowledge of the Borrower threatened, against the Borrower which if adversely
determined could have a Material Adverse Effect with respect to the Borrower.
Since the date of this Loan Agreement (or the date of the most recent update
hereunder), there have been no material change in the status of any actions,
suits, investigation, litigation or proceedings, disclosed hereunder except as
disclosed in writing to the Agent prior to or upon reaffirmation of this
provision as provided herein.
30
<PAGE>
5.11 Material Agreements.
-------------------
The Borrower is not in default in any material respect under any material
contract, lease, loan agreement, indenture, mortgage, security agreement, other
instrument evidencing debt or other material agreement or obligation to which it
is a party or by which any of its properties is bound.
5.12 Taxes.
-----
The Borrower filed, or caused to be filed, all material tax returns
(federal, state, local and foreign) required to be filed and paid all amounts of
taxes shown thereon to b due (including interest and penalties) and has paid all
other taxes, fees, assessments and other governmental charges (including
mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing
(or necessary to preserve any liens in favor of the Agent), by it, except for
such taxes (i) which are not yet delinquent or (ii) as are being contested in
good faith and by proper proceedings, and against which adequate reserves are
being maintained in an amount acceptable to the Agent in its discretion, but
only so long as there is no liability or risk of loss, sale or forfeiture of any
collateral pledged to the Agent. The Borrower is not aware of any proposed
material tax assessments against it. No extension of time for assessment or
payment by the Borrower of any federal, state or local tax is in effect.
5.13 Compliance with Law.
-------------------
The Borrower is in material compliance with all laws, rules, regulations,
orders and decrees (including without limitation building codes and zoning and
environmental laws) applicable to it, or to its properties. All federal, state
and local permits and other governmental actions that are required to be
obtained in connection with the operation, ownership, or financing of the
Project have been obtained (and are in full force and effect) except those
which, in Agent's sole discretion, are routine in nature and not normally
obtained until whey are required and which there is no reason to believe that
any difficulty will be encountered in obtaining provided that Borrower has so
certified.
5.14 ERISA.
-----
(i) No Reportable Event has occurred and is continuing with respect to any
Single Employer Plan, or the knowledge of Borrower, any Multiemployer Plan; (ii)
no single Employer Plan has an unfunded current liability (determined under
Section 412 of the Code) or an accumulated funding deficiency determined under
Section 302(a) of ERISA, (iii) no proceedings have been instituted, or, to the
knowledge of the Borrower, planned, to terminate any Plan, (iv) neither the
Borrower, any member of a Controlled Group, nor, to the knowledge of Borrower,
any duly-appointed administrator of a Plan has instituted or intends to
institute proceedings to withdraw from any Multiemployer Plan; and (v) each
Single Employer Plan has been maintained and funded in all material respects
with its terms and with the provisions of ERISA applicable thereto.
31
<PAGE>
5.15 Subsidiaries.
------------
The Borrower has no subsidiaries.
5.16 Use of Proceeds; Margin Stock.
-----------------------------
The proceeds of the Loans hereunder will be used solely for the purposes
specified herein. None of such proceeds will be used for the purpose of
purchasing or carrying any "margin stock" as defined in Regulations U,
Regulation X or Regulation G, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry "margin stock"
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of Regulation U, Regulation X or Regulation G. The
Borrower does not own "margin stock" except as identified in the financial
statements referred to in Section 5.06 hereof and, as of the date hereof, the
aggregate value of all "margin stock" owned by the Borrower does not exceed 25%
of the value of all the Borrower's assets.
5.17 Government Regulation.
---------------------
The Borrower is not subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940, or the Interstate Commerce Act, each as amended. Although the Borrower
is regulated under the rules and regulations of the Federal Communications
Commission, the Borrower and its Affiliates are in full and complete compliance
with all rules and regulations thereunder.
5.18 Patents, etc.
------------
The Borrower possesses all material patents, trademarks, service marks,
trade names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the operation of its business as presently
conducted and as proposed to be conducted.
5.19 Solvency.
--------
The borrower is and, after consummation of this Loan Agreement and after
giving effect to all Indebtedness incurred hereunder and all Liens created in
connection herewith, will be, solvent.
5.20 Business Activities.
-------------------
The Borrower does not and has not conducted any business other than to
enter into the Project Contracts and engage in activities to the development of
the Project.
5.21 Property Interests.
------------------
The Borrower holds valid easements and other interests in real property
sufficient to construct, operate and maintain the Project for a period of not
less than ten (10) years.
32
<PAGE>
5.22 Perfected Security Interest.
---------------------------
Upon making the filings set forth on Schedule 5.22, the Lenders will
-------------
have a first priority perfected security interest in the Security, excluding
easements.
5.23 Project Documents.
-----------------
Each Project Contract is and, immediately after the Closing Date and
after giving effect to the transactions contemplated by the Loan Documents, will
be in full force and effect.
5.24 Full Disclosure.
---------------
No representation, warranty or other statement made by the Borrower in
this Loan Agreement or any other Loan Document or in any certificate, written
statement or other document furnished to the Agent or any Lender by or on behalf
of the Borrower pursuant to this Loan Agreement or any other Loan Document,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to the Borrower which the Borrower has not disclosed to the Agent
and the Lenders in writing prior to the date hereof which materially adversely
affects, or which could reasonably be expected in the future to materially
adversely affect, the Project or the properties, business, operations or
financial condition or prospects of the Borrower or the other Project Parties or
the ability of the Borrower, the Pledgor or the other Project Parties to perform
its respective obligations under the Loan Documents to which it is or is to the
parties.
5.25 Environmental Compliance.
------------------------
To the best of the Borrower's knowledge without independent inquiry,
except as disclosed on Schedule 5.25 hereto, (i) there are no Hazardous
-------------
Materials on, under, in or about any of the Property except as are present
because of or become present in the ordinary course of Borrower's business and
(ii) the Borrower and its predecessors and Affiliates have at all times
conducted their businesses in material compliance with all applicable
Environmental Laws.
SECTION 6
AFFIRMATIVE COVENANTS
---------------------
The Borrower hereby covenants and agrees that so long as this Loan
Agreement is in effect and until the Loans, together with interest, fees and
obligations hereunder, have been paid in full:
6.01 Information Covenants
---------------------
The Borrower will furnish, or cause to be furnished, to the Agent:
33
<PAGE>
(a) Annual Financial Statements. As soon as available and in any event
---------------------------
within 90 days after the close of the fiscal year of the Borrower, a balance
sheet of the Borrower as at the end of such fiscal year together with related
statements of income and retained earnings and of cash flows for such fiscal
year, acting forth in comparative form figures for the preceding fiscal year,
all in reasonable detail and certified by an officer of the Borrower. As soon
as available and in any event within 120 days after the close of its fiscal
year, the Borrower will furnish or cause to be furnished, to the Agent, audited
financial statements of the Borrower. Such statements for the Borrower shall be
examined by independent certified public accountants of recognized national
standing acceptable to the Agent. The opinion of the accountants shall be to
the effect that such financial statements have been prepared in accordance with
Generally Accepted Accounting Principles applied on a consistent basis (except
for changes with which such accountants concur) and shall not be qualified as to
the scope of the audit or as to the status of such entities as going concerns.
Each annual financial statement furnished pursuant to this Section 6.01(a) shall
be accompanied by an officer's certificate of the Borrower stating that such
officer has obtained no knowledge of any Default or Event of Default that has
occurred and is continuing or, if in the opinion of such officer a Default or
Event of Default has occurred and is continuing, a statement as to the nature
thereof, all of the foregoing to be in reasonable detail and in form and
substance satisfactory to the Agent. It is specifically understood and agreed
that failure of the annual financial statements of the Borrower to be
accompanied by an officer's certificate in form and substance as provided
herein shall constitute a Default hereunder.
(b) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within 45 days after the end of each fiscal quarter of each fiscal year of
the Borrower, a balance sheet of the Borrower as of the end of such quarterly
period together with related statements of income and retained earnings and of
cash flows for such quarterly period and for the portion of the fiscal year
ending with such period (there shall be no Fourth Quarter financial statement
required hereunder), in each case setting forth in comparative form figures for
the corresponding period of the preceding fiscal year, all in reasonable form
and detail acceptable to the Agent, and accompanied by a certificate of the
chief financial officer of the Borrower as being true and correct and as having
been prepared in accordance with Generally Accepted Accounting Principles
applied on a consistent basis, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Additional Financial Information. (i) As soon as available and in
--------------------------------
any event within 25 days after the end of each fiscal month of each fiscal year
of the Borrower, a balance sheet of the Borrower as at the end of such monthly
period together with related statements of income and retained earnings and of
cash flows for such monthly period, all such information to be prepared by the
management of the Borrower and all in reasonable form and detail acceptable to
the Agent and (ii) such additional financial information as may reasonably be
requested by the Agent.
(d) Borrower Certificate. At the time of delivery of the financial
--------------------
statements provided for in Sections 6.01 (a) and (b) hereof, a certificate of
the chief financial officer of the Borrower substantially in the form of Exhibit
-------
6.01(d) to the effect that the
- ------
34
<PAGE>
Borrower is in compliance with the terms of the Loan Agreement and the other
Loan Documents (and specifically demonstrating compliance with the financial
covenants contained in Section 6.12 by calculation thereof as of the end of each
such fiscal period) and no Default or Event of Default exists, or if any Default
or Event of Default does exist specifying the nature and extent thereof and what
action the Borrower proposes to take with respect thereto.
(e) Auditor's Reports. Promptly upon receipt thereof, a copy of any
-----------------
other report or "management letter" submitted by independent accountants to the
Borrower in connection with any annual, interim or special audit of the books of
the Borrower.
(f) SEC and Other Reports. Promptly upon transmission thereof, copies
---------------------
of any filings and registrations with, and reports to, (i) the Securities and
Exchange Commission, or any successor agency, by the Borrower, and copies of all
financial statements, proxy statements, notices and reports as the Borrower
shall send to its shareholders or to the holders of any other Indebtedness in
their capacity as such holders, (ii) the FCC, and (iii) the United States
Environmental Protection Agency, or any state or local agency responsible for
environmental matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and safety
matters, or any successor agencies or authorities concerning environmental,
health or safety matters.
(g) Notice of Default, Litigation, Etc. Upon the Borrower obtaining
----------------------------------
knowledge thereof, it will give written notice to the Agent (i) immediately, of
the occurrence of an event or condition consisting of a Default, Event of
Default or Project Contract Default, specifying the nature and existence thereof
and what action the Borrower proposes to take with respect thereto, and (ii)
promptly, but in any event within 5 Business Days, of the occurrence of any of
the following with respect to the Borrower or any Project Party: (A) the
pendency or commencement of any litigation, arbitral or governmental proceeding
against such Person which is likely to have, or could have, a material Adverse
Effect on the business, properties, assets, condition (financial or otherwise)
or prospects of the Borrower or on the ability of the Borrower or the Pledgor to
perform its obligations hereunder or under any of the other Loan Documents to
which such Person is a party or any other Project Party to perform its
obligations under any Project Contract to which it is a party (B) any levy of an
attachment, execution or other process against its assets having a value of
$1,000,000 or more, (C) the occurrence of an event or condition which shall
constitute a default or event of default under any other agreement for borrowed
money, (D) any development in the Borrower's business or affairs which has
resulted in, or which the Borrower reasonable believes may result in, a
Material Adverse Effect on the business properties, assets, condition (financial
or otherwise) or prospects of the Borrower, (E) the institution of any
proceedings against, or the receipt of notice of potential liability or
responsibility for violation, or alleged violation of any federal, state or
local law, rule or regulation, including but not limited to regulations
promulgated under the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
"6901 et seq., regulating the generation, handling or disposal of any toxic or
-- ---
hazardous waste or substance or the release into the environment or storage of
any toxic
35
<PAGE>
or hazardous waste or substance, the violation of which could or would
likely have a Material Adverse Effect on the business, assets,
properties condition (financial or otherwise) or prospects of the
Borrower, (F) any notice or determination concerning the imposition of
any withdrawal liability by a Multiemployer Plan on the Borrower or any
of its ERISA Affiliates, the determination that a Multiemployer Plan is,
or is expected to be, in reorganization within the meaning of Title IV
or ERISA, the termination of any Plan, and the amount of liability
incurred or which may be incurred in connection with any such event, or
(G) the occurrence of any casualty in excess of $1,000,000.
(h) Annual Operating Budget. The annual operating budget
-----------------------
prepared by the Borrower.
(i) Pledgor Charter Documents. Promptly upon filing thereof,
-------------------------
(x) the Restated Certificate of Incorporation and (y) Certificate of
Designations, Powers, Preferences and Relative, Participating or Other Rights,
and the Qualifications, Limitations or Restrictions Thereof, of Series A
Convertible Preferred Stock ($.01 Par Value) of the Pledgor, certified by the
Secretary of State of the state of the Pledgor's incorporation.
6.02 Preservation of Existence and Franchises.
----------------------------------------
The Borrower will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights,
franchises and authority.
6.03 Books, Records and Inspections.
------------------------------
The Borrower will keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of
Generally Accepted Accounting Principles applied on a consistent basis
(including the establishment and maintenance of appropriate reserves). The
Borrower will permit, upon reasonable notice, officers or designated
representatives of any of the Lenders to visit and inspect its books of account
and records and any of its properties or assets (in whomever's possession) and
to discuss the affairs, finances and accounts of the Borrower, and be advised as
to the same by, the Borrower's officers, directors and independent accountants.
6.04 Compliance with Law.
-------------------
The Borrower will comply with all applicable laws, rules, regulations
and orders of, and all applicable restrictions imposed by all applicable
governmental bodies, foreign or domestic, or authorities and agencies thereof
(including quasi-governmental authorities and agencies), in respect of the
conduct if its business and the ownership of its property (including applicable
statutes, regulations, orders and restrictions relating to environmental
standards and controls), except where the failure to be in compliance would not
have a Material Adverse Effect on the business, assets, properties or condition
(financial or otherwise) of the Borrower or on the ability of the Borrower to
perform its obligations hereunder or under any other Loan Document to which it
is a party. The Borrower will maintain in full force and effects all permits and
other authorizations referred to in Section 5.13.
36
<PAGE>
6.05 Payment of Taxes and Other Indebtedness.
---------------------------------------
The Borrower will pay and discharge (i) all taxes, assessments and
governmental charges or levies imposed upon it, or upon its income or profits,
or upon any of its properties, before they shall become delinquent, (ii) all
lawful claims (including claims for labor, materials and supplies) which, if
unpaid, might give rise to a Lien or charge upon any of its properties, and
(iii) except as prohibited hereunder, all of its other Indebtedness as it shall
become due; provided, however, that the Borrower shall not be required to pay
-------- -------
any such tax, assessment, charge, levy, claim or Indebtedness which is being
contested in good faith by appropriate proceedings and as to which adequate
reserves therefor have been established in accordance with Generally Accepted
Accounting Principles, unless the failure to make any such payment shall give
------
rise to an immediate right to foreclosure on a lien securing such amounts, in
which case the Borrower shall make immediate payment of or shall otherwise
satisfy such tax, assessment, charge, levy, claim or Indebtedness upon
commencement of proceedings to foreclose on any such lien.
6.06 Insurance.
---------
The Borrower will at all times maintain in full force and effect
insurance (including worker's compensation insurance, liability insurance,
casualty insurance and business interruption insurance) in such amounts,
covering such risks and liabilities and with such deductibles or self-insurance
retentions as are in accordance with normal industry practice unless higher
limits or other types of coverage are required by the terms of the other Loan
Documents or are otherwise reasonably required by the Agent. Such insurance
shall include the following:
(a) Insurance Against Loss or Damage. Without cost, to any
--------------------------------
Lender, the Borrower shall maintain or cause to be maintained in effect
at all time insurance with respect to the Project against all risks of
physical loss in such amount as the Borrower would, in the prudent
management of its property, maintain, or as would be maintained by
others similarly situated in respect of property similar to the Project;
provided that the amount of such insurance shall not be less than the
--------
replacement cost of the facility. All insurance policies shall be on an
"agreed amount/replacement cost" basis, in such form (including the form
of the loss payable clauses to be endorsed to all property, delayed
opening and business interruption policies), of such type and scope of
coverage and with such insurers as shall at all times be reasonably
satisfactory to the Required Lenders. On or prior to the Closing Date,
the Borrower shall procure or cause to be procured the following types
of insurance:
(i) Workers' Compensation Insurance: As required by
-------------------------------
state law, including, without limitation, the Borrower's manager
shall maintain employer's liability insurance for all employees
of the contractor in the amount of $100,000/$500,000/$100,000
per occurrence (the policies with respect to which shall include
all states' coverage).
(ii) Commercial General Liability Insurance: Insurance
-------------------------------------
against claims for personal injury (including bodily injury and
death) and property
37
<PAGE>
damage. Such insurance shall provide coverage for products, completed
operations, blanket contractual and broad form property damage with a
$1,000,000 minimum limit per occurrence for combined bodily injury and
property damage and a $2,000,000 aggregate annual limit.
(iii) Comprehensive Automobile Liability: Against claims of personal
----------------------------------
injury (including bodily injury and death) and property damage covering all
owned, leased, non-owned and hired vehicles with a $1,000,000 minimum limit
per occurrence for combined bodily injury and property damage liability.
(iv) Excess Insurance: Excess liability insurance on an "occurrence"
----------------
basis covering claims in excess of the underlying insurance described in
the foregoing clauses (i), (ii), (iii) with a $15,000,000 minimum limit per
occurrence and a $15,000,000 aggregate annual limit.
(v) Duration: Such insurance as required in clauses (i), (ii), (iii)
--------
and (iv) of this Section 6.06(a) shall be continued in force until such
time as the Notes shall have been paid in full and the obligations of the
Lenders shall have been terminated.
(b) Additional Insurance. On or prior to the Closing Date, the Borrower
--------------------
shall procure at its own expense and maintain in full force and effect, with
responsible insurers authorized to do business in the State of North Carolina
with a Best's rating of "A" or better (except for policies underwritten by
Lloyds of London and approved English companies, acceptable to the Agent), the
following additional insurance:
(i) Physical Damage Insurance: Property damage insurance on the
-------------------------
"special form" basis including coverage against damage or loss caused by
earth movement and flood including the remainder of testing exposures and
providing (1) coverage for the Project in a minimum aggregate amount equal
to the "full insurable value" of the Project and (2) transit coverage,
including ocean marine coverage, with sub-limits sufficient to insure the
full replacement value of all property or equipment removed from the
Project. For purposes of this Section 6.06, "full insurable value" shall
mean the full replacement value of the Project, including any improvements
and equipment and supplies, without deduction for physical depreciation;
provided however, that so long as the Borrower maintains self-insurance for
-------- -------
transmission and distribution lines, "full insurance value" shall exclude
the value of any transmission and distribution lines; all such policies may
have deductibles of not greater than $50,000 except for earth movement
which will have the lowest deductible available (in the sole judgement of
the Agent) on commercially reasonable terms in the insurance market place.
Such insurance shall include an "agreed amount" clause or no coinsurance
clause.
(ii) Business Interruption Insurance: Business Interruption insurance
-------------------------------
covering fixed expenses and debt service for a minimum period of 12
38
<PAGE>
months; such policy may have a deductible of not greater than 30 days debt
service.
(c) Payments. All insurance policies required hereby covering loss or
--------
damage to the Project shall name the Agent as loss payee with standard mortgager
endorsement, and shall provide that any payment thereunder for any loss or
damage shall be made to the Agent for the benefit of the Lenders, except that
such policies may provide that any payment of less than $100,000 made in respect
of any single casualty or other occurrence may be paid solely to the Borrower,
unless the Agent shall have notified the insurer that an Event of Default has
occurred and is continuing hereunder.
(d) Special Policy Provisions. All policies (other than policies with
-------------------------
respect to workers' compensation, occupational disability benefits or similar
insurance) shall insure the interests of the Agent and the Lenders regardless of
any breach or violation by the Borrower of warranties, declarations or
conditions contained in such policies or any action or inaction of the Borrower
or any other person; each liability policy shall expressly provide that all
provisions thereof, except the limits of liability (which shall be applicable to
all insureds as a group) and liability for premiums, commissions, assessments or
calls (which shall be solely a liability of the Borrower) shall operate in the
same manner as if there were a separate policy covering each such insured; each
policy (except, Workers' Compensation) shall waive any right of subrogation of
the insurers to any set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of the Borrower; each such
policy shall provide that, if such insurance is to be canceled or terminated for
any reason whatsoever the insurers will promptly notify the Borrower and the
Agent, and any such cancellation or termination shall not be effective as to the
Agent and the Lenders for 60 days after receipt of such notice by the Agent, and
that appropriate certification shall be made to the Borrower by each insurer
with respect thereto; and each policy shall provide that the Borrower has
assigned all proceeds obtained under such policy to the Agent. Liability
insurance as required in this Section 6.06(a)(iii) and (iv) shall be primary and
not excess to or contributing with any insurance or self insurance maintained by
the Lenders, or their respective officers and employees (and such other persons
as may be required by the Project Contracts).
(e) Additional Requirements. In addition to the other requirements of
-----------------------
this Section 6.06, the Borrower shall comply in all respects with any insurance
requirements contained in any other Project Contracts to which it is a party.
(f) Certificates of Insurance. The Borrower shall deliver to the Agent
-------------------------
prior to the expiration date of each insurance policy required to be maintained
by it pursuant to this Section 6.06, a certificate executed by the insurer or
its duly authorized agent evidencing the continuance of such insurance policy
(or, upon request, a certified copy of such portions of such insurance policy
which concern the Project).
(g) No Duty of any Agent or any Lender to Verify. No provision of this
--------------------------------------------
Section 6.06 or any provision of any other Project Contract shall impose on the
Agent or
39
<PAGE>
any Lender any duty or obligation to verify the existence or adequacy of
the insurance coverage maintained by the Borrower, nor shall any Agent or
any Lender be responsible for any representations or warranties made by or
on behalf of the Borrower to any insurance company or underwriter.
6.07 Maintenance of Property.
-----------------------
The Borrower will maintain and preserve its properties and equipment used
or useful in its business (in whomsoever's possession as they may be) in good
repair, working order and condition, normal wear and tear excepted, and will
make, or cause to be made, in such properties and equipment from time to time
all repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto as may be needed or proper, in the manner customary for
companies in similar businesses and to the extent necessary to maintain and
preserve the Project in a proper and viable working condition capable of
handling the telecommunication transmission capacities for which it was designed
to transmit.
6.08 Performance of Obligations.
--------------------------
The Borrower will perform in all material respects all of its obligations
(including, except as may be otherwise prohibited or contemplated hereunder,
payment of Indebtedness in accordance with its terms) under the terms of the
Project Contracts to which it is a party and all other material agreements,
indentures, mortgages, security agreements or other debt instruments to which it
is a party or by which it is bound.
6.09 ERISA.
-----
The Borrower will (a) at all times, make prompt payment of all
contributions required of it under all Plans and required to meet the minimum
funding standards set forth in ERISA with respect to Plans maintained by it; (b)
promptly upon request, furnish the Agent copies of each annual report/return
(Form 5500 Series), as well as all schedules and attachments filed with the
Department of Labor and/or the Internal Revenue Service pursuant to ERISA, and
the regulations promulgated thereunder, in connection with each Plan for each
Plan Year, (c) notify the Agent immediately of any fact known by it, including,
but not limited to, any Reportable Event arising in connection with any Plan
maintained by it, which reasonably could constitute grounds for termination
thereof by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan, together with a statement,
if requested by the Agent, as to the reason therefor and the action, if any,
proposed to be taken with respect therefor; and (d) furnish to the Agent, upon
its request, such additional information concerning any Plan maintained by it as
may be reasonably requested. The Borrower will not (I) terminate a Plan of any
such termination would give rise to or result in any material liability, or (II)
cause or permit to exist any event or condition which presents a material risk
of termination of a Single Employer Plan at the request of the PBGC.
40
<PAGE>
6.10 Use of Proceeds.
---------------
The proceeds of the Loans hereunder shall be used solely to refinance the
Project Finance Loan.
6.11 Financial Covenants.
-------------------
(a) Total Leverage Ratio. The Borrower shall maintain during the
--------------------
periods listed below a Total Leverage Ratio of not greater than:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Closing Date through June 29, 1997 4.5:1.0
From June 30, 1997 and thereafter 4.0:1.0
</TABLE>
(b) Interest Coverage Ratio. The Borrower shall at all times
-----------------------
maintain an Interest Coverage Ratio of at least 2.25:1.0.
SECTION 7
NEGATIVE COVENANTS
------------------
The Borrower hereby covenants and agrees that so long as this Loan
Agreement is in effect and until the Loans, together with interest, fees and
other obligations hereunder and under the other Loan Documents, have been paid
in full:
7.01 Indebtedness.
------------
The Borrower will not contract, create, incur, assume or permit to exist
any Indebtedness, except:
(a) Indebtedness arising under this Loan Agreement and the other
Loan Documents:
(b) Indebtedness existing as of the Closing Date as referenced in
Section 5.09, without giving effect to any subsequent extension, renewal or
refinancing thereof:
(c) Permitted Indebtedness; and
(d) Capitalized Lease obligations of the Borrower in connection with
the lease from The Southern Company (or an affiliate thereof) of a portion of
its fiber optic telecommunications network running from Birmingham, Alabama to
Montgomery, Alabama; provided, however, that (i) such Capitalized Lease
-------- -------
obligations may not exceed $81,000 per month and (ii) such lease must be
satisfactory to the Agent and approved by the Required Lenders.
41
<PAGE>
7.02 Liens.
-----
The Borrower will not contract, create, incur, assume or permit to exist
any Lien with respect to any of its property or assets of any kind (whether real
or personal, tangible or intangible), whether now owned or after acquired,
except for Permitted Liens.
7.03 Guaranty Obligations.
--------------------
The Borrower will not enter into or otherwise become or be liable in
respect of any Guaranty Obligation, except for Guaranty Obligations arising or
permitted under this Loan Agreement or the other Loan Documents.
7.04 Nature of Business.
------------------
Other than performing the duties and obligations contemplated by the
Project Contracts, the Borrower will not substantively alter the character or
conduct of its business from that conducted as of the Closing Date or engage in
any other business not engaged in on the Closing Date or discontinue any
existing lines of business engaged in on the Closing Date.
7.05 Consolidation, Merger, Sale or Purchase of Assets, etc.
------------------------------------------------------
The Borrower will not dissolve, liquidate, or wind up its affairs, or enter
into any transaction of merger or consolidation, sell, transfer, lease or
otherwise dispose of all or any substantial part of its property or assets, or
purchase, lease or otherwise acquire (in a single transaction or a series of
related transactions) all or any substantial part of the property or assets of
any Person (other than purchases or other acquisitions of inventory, leases,
materials, property and equipment in the ordinary course of business, except as
otherwise limited or prohibited herein) or to agree to do any of the foregoing
at a future time, except for (i) the sale or disposition of machinery and
equipment no longer useful in the conduct of its business the fair market value
of which does not exceed $1,000,000 in the aggregate, (ii) investments,
acquisitions and transfers or dispositions of properties permitted pursuant to
Section 7.06 (Investments) and (iii) the merger of any Person into the Borrower,
provided that the Borrower shall be the surviving corporation, management and
- --------
control of the Borrower shall remain substantially unchanged and no Default or
Event of Default shall exist either immediately prior to or after giving effect
to such merger. As used herein, "substantial part" means property or assets with
a purchase on sale price or fair market value, whichever is greater, of
$1,000,000 or more.
7.06 Advances, Investments and Loans.
-------------------------------
The Borrower will not lend money or credit or make advances to any Person,
or purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to any Person except for Permitted
Investments.
42
<PAGE>
7.07 Transactions with Affiliates.
----------------------------
The Borrower will not enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder, partner or Affiliate other than on terms and
conditions substantially as favorable to the Borrower as would be obtainable by
it in a comparable arm's-length transaction with a Person other than an
Affiliate.
7.08 Operating Lease Obligations.
---------------------------
The Borrower will not enter into, assume or permit to exist any
obligations for the payment of rental for any property (real, personal or mixed,
tangible or intangible) under leases, subleases or similar arrangements which in
the aggregate would exceed $1,000,000 in any fiscal year on a consolidated
basis.
7.09 Limitation on Further Negative Pledges.
--------------------------------------
Except with respect to prohibitions against other encumbrances on
specific property encumbered to secure particular Indebtedness otherwise
permitted hereunder (which Indebtedness relates solely to such specific property
and improvements and accretions thereto), the Borrower will not assume or
become subject to any agreement prohibiting or otherwise restricting the
guaranty by it of any obligations, prohibiting or otherwise restricting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation.
7.10 Project Contracts.
-----------------
The Borrower will not amend, modify, terminate or waive compliance with
any material provision of, or suffer to exist any material Project Contract
Default under, or assign any rights it may have under, any Project Contract
without the consent of the Agent with the approval of the Required Lenders.
7.11 Restricted Payments.
-------------------
The Borrower will not directly or indirectly declare, order, make or set
apart any sum for or pay any Restricted Payment.
7.12 Environmental Issues.
--------------------
From the date hereof and so long as this Agreement shall remain in
effect, the Borrower will not cause the presence, use, generation, release,
discharge, storage, disposal or transportation for any Hazardous Materials on,
under, in, about, near, or to or from, the Property except in the ordinary
course of the Borrower's business and in compliance with all applicable
Environmental Laws.
43
<PAGE>
7.13 Subsidiaries.
------------
The Borrower will not have any Subsidiaries.
SECTION 8
EVENTS OF DEFAULT
-----------------
8.01 Events of Default.
-----------------
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
----------------
(a) Payment. The Borrower shall (i) default in the payment when due
-------
of any principal under the Notes, or (ii) default, and such default shall
continue for five (5) or more days, in the payment when due of any interest
required with respect to the Notes, or of any fees or other amounts owing
hereunder, under any of the other Loan Documents or in connection herewith;
or
(b) Representations. Any representation, warranty or statement made
---------------
or deemed to be made by the Borrower or the Pledgor herein or in any of the
other Loan Documents to which such Person is a party or in any statement or
certificate delivered or required to be delivered pursuant hereto or
thereto (whether such statement or certificate is delivered by or required
of the Borrower, the Pledgor or an office of either of them), shall prove
untrue in any material respect on the date as of which it was deemed to
have been made; or
(c) Covenants. The Borrower shall (i) default in the due
---------
performance or observance of any term, covenant or agreement contained in
Sections 6.05 or 6.06 or (ii) default in the due performance or observance
by it of any term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of this Section 8.01) contained in this Loan
Agreement and such default shall continue unremedied for a period of at
least thirty (30) days after written notice thereof by the Agent to the
Borrower; or
(d) Other Loan Documents. (i) A default shall occur in connection
--------------------
with the due performance or observance of any term, covenant or agreement
in any of the other Loan Documents (subject to applicable grace or cure
periods, if any), or (ii) any Loan Document shall fail to be in full force
and effect or to give the Agent the liens, rights, powers and privileges
purported to be created thereby (including without limitation, a first
priority perfected security interest in, and lien on all of the collateral
subject thereto), superior to the prior to the rights of all third Persons
and subject to no other liens (except to the extent expressly permitted
herein or therein); or
(e) Bankruptcy/Insolvency of Borrower or Project Parties. Any of
----------------------------------------------------
the following: (i) The Borrower or any Specified Project Party shall
commence a voluntary
44
<PAGE>
case concerning itself under the Bankruptcy Code in Title 11 of the United
States Code (as amended, modified, succeeded or replaced, from time to time, the
"Bankruptcy Code"), (ii) an involuntary case is commenced against the Borrower
or any Specified Project Party under the Bankruptcy Code and the petition is not
controverted within 10 days, or dismissed within 60 days, after commencement of
the case; (iii) a custodian (as defined in the Bankruptcy Code) is appointed
for, or takes charge of all or substantially all of the property of the Borrower
or any Specified Project Party; (iv) the Borrower or any Specified Project Party
commences any other proceeding under any reorganization, arrangement, adjustment
of the debt, relief of creditors, dissolution, insolvency or similar law of any
jurisdiction whether now or hereafter in effect relating to such Person; (v)
there is commenced against the Borrower or any Specified Project Party any such
proceeding which remains undissmissed for a period of 60 days; (vi) the Borrower
or any Specified Project Party is adjudicated insolvent or bankrupt; (vii) any
order of relief or other order approving any such case or proceeding is entered;
(viii) the Borrower or any Specified Project Party suffers appointment of any
custodian or the like for it or for any substantial part of its property to
continue unchanged or unstayed for a period of 60 days; (ix) the Borrower or any
Specified Project Party makes a general assignment for the benefit of creditors;
or any corporate action is taken by the Borrower or any Specified Project Party
for the purpose of effecting any of the foregoing; provided, however, that in
-------- -------
the case of any Specified Project Party other than Sprint Communications, the
occurrence of any of the foregoing events shall not be an Event of Default under
this Section 8.01(e) if the Borrower provides evidence satisfactory to the Agent
that the Borrower has obtained substitute performance from a third party under
each Specified Project Contract to which such Specified Project Party was a
party on terms which preserve the economic viability of the Project and are
satisfactory to the Lenders; or
(f) Defaults under Other Agreements. (i) The Borrower shall (x) default
-------------------------------
in any payment (beyond the applicable grace period with respect thereto, if any)
with respect to any indebtedness or (y) default in the observance or performance
of any agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event or condition shall occur or condition exist, the effect of which
default or other event or condition is to cause, or permit, the holder or
holders of such Indebtedness (or trustee or agent on behalf of such holders) to
cause (determined without regard to whether any notice or lapse of time is
required), any such Indebtedness to become due prior to its stated maturity;
(ii) a Material Default shall occur under the Telecommunications System
Agreement; or (iii) any such-Indebtedness referred to in clause (i) above shall
be declared due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof; or
(g) Judgments. One or more judgments or decrees shall be entered
---------
against the Borrower involving a liability of $1,000,000 or more in any
instance, or $1,000,000 or more in the aggregate for all such judgments and
decrees (not paid or fully covered by insurance provided by a carrier who has
acknowledged coverage) and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 60 days from the
entry thereof; or
45
<PAGE>
(h) Ownership/Change of Control. There shall occur a Change of
---------------------------
Control;
(i) ERISA. The Borrower or any member of any Controlled Group shall
-----
fail to pay when due an amount or amounts aggregating in excess of $500,000
which it shall have become liable to pay under Title IV of ERISA; or notice of
intent to terminate a Single Employer Plan or Plans with respect to which the
aggregate amount of unfunded benefit liabilities (as defined in Section
4001(a)(18)) are in excess of $800,000 (individually and collectively, a
"Material Plan") shall be filed under Title IV of ERISA by the Borrower or any
-------------
member of a Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed to administer any
Material Plan and such proceedings or appointment shall not be controverted
within fifteen (15) days, or dismissed within sixty (60) days, after
commencement thereof; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one
or more Multiemployer Plans which could cause one or more members of the
Controlled Group to incur a current payment obligation in excess of $800,000; or
(j) Project Loss. The Project shall, in the reasonable judgment of
------------
the Lenders, be (i) a Substantial Loss, (ii) stolen or (iii) requisitioned or
taken by condemnation, and the Agent shall have given the Borrower 30 days'
prior written notice of such judgment; or
(k) Governmental Order. The Borrower shall be prohibited or
------------------
otherwise materially restrained from conducting its business by virtue of any
governmental order which remains unstayed and in effect for a period of 60 days;
or
(l) Security Interests. The Lenders shall cease to have a perfected
------------------
first priority security interest in the Security in which a security interest
can be perfected by the filing of a financing statement; or
(m) Liens. The Borrower or the Pledgor, as applicable, shall create
-----
or suffer to exist any lien on any part of the Security, other than the liens
created pursuant to or permitted by the Loan Documents, which is not discharged
or removed within a period of 30 days, unless a bond or other security equal in
amount to the lien and satisfactory to the Lenders shall have been posted by the
Borrower; or
(n) Taxes. The Borrower shall fail to pay any tax which would have
-----
a Material Adverse Effect on the Borrower before the delinquency date thereof,
unless the Borrower is contesting such tax in good faith and has either posted
bond or established an appropriate reserve; or
46
<PAGE>
(o) Insurance. Failure to maintain insurance coverage as herein
---------
required, subject to continued commercial availability on reasonable terms;
or
(p) Project Contract Covenant. The occurrence of a Project Contract
-------------------------
Default by the Borrower or a counter-party consisting of a failure to
perform a material covenant or condition; provided, however that, with
-----------------
respect to any Project Party other than the Borrower, such a Project
Contract Default shall not be an Event of Default if, within 60 days after
the Borrower shall have obtained knowledge of the Project Contract Default,
Borrower shall obtain substitute performance from a third party on terms
which preserve the economic viability of the Project and are satisfactory
to the Lenders;
then, in any such event, and at any time thereafter, the Agent may take any of
the following actions without prejudice to the rights of the Lenders to enforce
its claims against the Borrower except as otherwise specifically provided for
herein:
(i) Termination of Obligations. Declare the Lenders'
--------------------------
obligations terminated;
(ii) Acceleration of Loans. Declare the unpaid principal of
---------------------
and any accrued interest in respect of the Notes and any and all
other indebtedness or obligations of any and every kind owing by the
Borrower to the Lenders to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the
Borrower;
(iii) Enforcement of Rights. Enforce any and all Liens and
---------------------
security interests in favor of the Agent or the Lenders in respect of
the Notes and the Loans and other amounts due, including without
limitation all rights and interests created and existing under the
Loan Documents, at law or in equity, and all rights of set off; and
(iv) Assignment of Project Contracts. Require that the
-------------------------------
Borrower (x) assign to the Agent, by executing Assignments
substantially in the form of Exhibit 8.01(iv)(A) attached hereto, all
-------------------
Project Contracts not then assigned to the Agent, (y) use its best
efforts to cause each counterparty to a Project Contract that has not
yet executed a Consent and Agreement to execute a Consent and
Agreement substantially in the form of Exhibit 8.01(iv)(B) attached
-------------------
hereto and (z) pay any and all expenses associated with the
foregoing;
provided, however, that, notwithstanding the foregoing, if an Event of Default
- --------
specified in Section 8.01(e) (Bankruptcy) with respect to the Borrower shall
occur, then the Notes and the Loans and other indebtedness or obligations owing
to the Lenders under the Loan Documents shall immediately become due and payable
without the giving of any notice or other action by the Agent or the Lenders.
47
<PAGE>
SECTION 9
AGENCY PROVISIONS
-----------------
9.01 Appointment.
-----------
Each Lender hereby designates and appoints NationsBank, N.A. as
administrative agent (in such capacity as Agent hereunder, the "Agent") of such
-----
Lender to act as specified herein and the other Loan Documents, and each such
Lender hereby authorizes the Agent as the agent for such Lender, to take such
action on its behalf under the provisions of this Loan Agreement and the other
Loan Documents and to exercise such powers and perform such duties as are
expressly delegated by the terms hereof and of the other Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Loan Documents, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein and therein, or any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Loan Agreement or any of the
other Loan Documents, or shall otherwise exist against the Agent. The
provisions of this Section are solely for the benefit of the Agent and the
Lenders and neither the Borrower nor the Pledgor shall have any rights as a
third party beneficiary of the provisions hereof. In performing its functions
and duties under this Loan Agreement and the other Loan Documents, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for the Borrower or the Pledgor.
9.02 Delegation of Duties.
--------------------
The Agent may execute any of its respective duties hereunder or under the
other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
9.03 Exculpatory Provisions.
----------------------
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Loan Documents (except for its
or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or the Pledgor contained
herein or in any of the other Loan Documents to which such Person is a party or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection herewith or in
connection with the other Loan Documents, or enforceability or sufficiency
herefor of any of the other Loan Documents, or for any failure of the Borrower
to perform its obligations hereunder or thereunder. The Agent shall not be
responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficency of this Loan Agreement, or any of
the other Loan Documents or for any representations, warranties, recitals or
statements made herein or therein or
48
<PAGE>
made by the Borrower or the Pledgor in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agent to
the Lenders or by or on behalf of the Borrower or the Pledgor to the Agent or
any Lender or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence or possible existence of any Default or Event of Default or to
inspect the properties, books or records of the Borrower or the Pledgor.
9.04 Reliance on Communications.
--------------------------
The Agent shall be entitled to rely, and shall be fully protected in
relying upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower or the Pledgor, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat the Lenders as the owner of their respective interests hereunder for
all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Agent in accordance with Section 10.03
hereof. The Agent shall be fully justified in failing or refusing to take any
action under this Loan Agreement or under any of the other Loan Documents unless
it shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder or
under any of the other Loan Documents in accordance with a request of the
Required Lenders (or to the extent specifically provided in Section 10.06, all
the Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
9.05 Notice of Default.
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from a Lender or the Borrower or the Pledgor referring to the Loan
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect in such Default or Event of Default as shall
be reasonably directed by the Required Lenders.
9.06 Non-Reliance on Agent and Other Lenders.
---------------------------------------
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or
49
<PAGE>
warranty by the Agent to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
it own appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Borrower and its Affiliates and made its own decision to make its Loans
hereunder and enter into this Loan Agreement. Each Lender also represents that
it will, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Loan Agreement, and to make such
investigation as it deems necessary to inform itself as to the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Affiliates. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, assets, property, financial or other conditions, prospects or
creditworthiness of the Borrower and its Affiliates which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
9.07 Indemnification.
---------------
The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Lender Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time be imposed on, incurred by or asserted
against the Agent in their respective capacities as such in any way relating to
or arising out of this Loan Agreement or the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Lender shall be
--------
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section shall
survive the payment of all amounts payable hereunder and under the other Loan
Documents.
9.08 Agent in its Individual Capacity.
--------------------------------
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or the Pledgor as
though the Agent were not Agent hereunder. With respect to the Loans made, the
Agent shall have the same rights and powers under this Loan Agreement as any
Lender and may exercise the same as though it were not Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
50
<PAGE>
9.09 Successor Agent.
---------------
The Agent may, at any time, resign upon 20 days' written notice to the
Lenders, and be removed with or without cause by the Required Lenders upon 30
days' written notice to the Agent. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the notice of resignation
or notice of removal, as appropriate, then the retiring Agent shall select a
successor Agent provided such successor is a Lender hereunder or a commercial
bank organized under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least $400,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations as Agent, as
appropriate, under this Loan Agreement and the other Loan Documents and the
provisions of this Section 9.09 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Loan Agreement.
SECTION 10
MISCELLANEOUS
-------------
10.01 Notices.
-------
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service with
arrangements made for overnight delivery, or (iv) the third Business Day
following the day on which the same is sent by certified or registered mail,
postage prepaid, in each case to the respective parties at the address set forth
below, or at such other address as such party may specify by written notice to
the other parties hereto:
if to the Borrower: Gulf States Transmission Systems, Inc.
910 First Avenue
West Point, Georgia 31833
Attn: Douglas A. Shumate
Telephone: (706) 645-8189
Telecopy: (706) 645-8989
51
<PAGE>
if to the Agent: NationsBank, N.A., as Agent
Agency Services
NC1-001-15-04
101 North Tryon Street, 15th Floor
Charlotte, North Carolina 28255
Attn: Marie Garcelon
Telephone: (704) 388-3918
Telecopy: (704) 386-8694
with a copy to: NationsBank of Texas, N.A.
Communications Finance Group
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn: Doug Stuart
Telephone: (214) 508-0922
Telecopy: (214) 508-9390
10.02 Right of Set-Off.
----------------
In addition to any rights now or hereafter granted under applicable law or
otherwise, and not by way of limitation of any such rights, upon the occurrence
of an Event of Default, each Lender is authorized at any time and from time to
time, without presentment, demand, protest or other notice of any kind (all of
which rights being hereby expressly waived), to set-off and to appropriate and
apply any and all deposits (general or special) and any other indebtedness at
any time held or owing by such Lender (including, without limitation branches,
agencies or Affiliates of the Lender wherever located) to or for the credit or
the account of the Borrower against the obligations and liabilities of the
Borrower to such Lender hereunder, under the Notes, the other Loan Documents or
otherwise, irrespective of whether such Lender shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of them,
may be contingent or unmatured, and any such set-off shall be deemed to have
been made immediately upon the occurrence of an Event of Default even though
such charge is made or entered on the books of such Lender subsequent thereto.
10.03 Benefit of Agreement.
--------------------
(a) Generally. This Loan Agreement shall be binding upon and inure
---------
to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that the Borrower may not assign
--------
and transfer any of its interests without prior written consent of the
Lenders; provided further that the rights of each Lender to transfer,
-------- -------
assign or grant participations in its rights and/or obligations hereunder
shall be limited as set forth in this Section 10.03, provided however that
--------
nothing herein shall prevent or prohibit any Lender from (i) pledging its
Loans hereunder to a Federal Reserve Bank in support of borrowings made by
such Lender from such Federal Reserve Bank, or (ii) granting assignments or
participation in such Lender's Loans hereunder to its parent company and/or
to any affiliate of such Lender which is at least 50% owned by such Lender
or its parent company.
52
<PAGE>
(b) Assignments. Each Lender may assign all or a portion of its
-----------
rights and obligations hereunder pursuant to an assignment agreement. Any
assignment hereunder shall be effective upon delivery to the Agent of
written notice of the assignment together with a transfer fee of $2,500
payable to the Agent for its own account. The assigning Lender will give
prompt notice to the Agent and the Borrower of any such assignment. Upon
the effectiveness of any such assignment (and after notice to the Borrower
as provided herein), the assignee shall become a "Lender" for all purposes
of this Loan Agreement and the other Loan Documents and, to the extent of
such assignment, the assigning Lender shall be relieved of its obligations
hereunder to the extent of the Loans being assigned. The Borrower agrees
that upon notice of any such assignment and surrender of the appropriate
Note or Notes, it will promptly provide to the assigning Lender and to the
assignee separate promissory notes in the amount of their respective
interests substantially in the form of the original Note (but with notation
thereon that it is given in substitution for and replacement of the
original Note or any replacement notes thereof) and will execute and
deliver all documentation required by the Lenders to facilitate such
assignment.
(c) Participations. Each Lender may sell, transfer, grant or assign
--------------
participations in all or any part of such Lender's interests and
obligations hereunder; provided that (i) such selling Lender shall remain a
--------
"Lender" for all purposes under this Loan Agreement (such selling Lender's
obligations under the Loan Documents remaining unchanged) and the
participant shall not constitute a Lender hereunder; (ii) no such
participant shall have, or be granted, rights to approve any amendment or
waiver relating to this Loan Agreement or the other Loan Documents except
to the extent any such amendment or waiver would (A) reduce the principal
of or rate of interest on or fees in respect of any Loans in which the
participant is participating, (B) postpone the date fixed for any payment
of principal (including extension of the Maturity Date, interest or fees in
which the participant is participating, or (C) release all or substantially
all of the collateral or guaranties (except as expressly provided in the
Loan Documents) supporting any of the Loans in which the participant is
participating, (iii) sub-participations by the participant (except to an
affiliate, parent company or affiliate of a percent company of the
participant) shall be prohibited and (iv) any such participations shall be
in a minimum aggregate amount of $5,000,000.00 and in integral multiples of
$1,000,000.00 in excess thereof. In the case of any such participation, the
participant shall not have any rights under this Loan Agreement or the
other Loan Documents (the participant's rights against the selling Lender
in respect of such participation to be those set forth in the participation
agreement with such Lender creating such participation) and all amounts
payable by the Borrower hereunder shall be determined as if such Lender had
not sold such participation, provided, however, that such participant shall
be entitled to receive additional amounts under Sections 3.01, 3.02, 3.03
and 3.04 on the same basis as if it were a Lender.
10.04 No Waiver; Remedies Cumulative.
------------------------------
No failure or delay on the part of the Agent or any Lender in exercising
any right, power or privilege hereunder or under any other Loan Document and no
course of dealing between the
53
<PAGE>
Borrower or the Pledgor and the Agent or any Lender shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies provided herein are cumulative
and not exclusive of any rights or remedies which the Agent or any Lender would
otherwise have. No notice to or demand on the Borrower in any case shall entitle
the Borrower or the Pledgor to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the Agent or the
Lenders to any other or further action in any circumstances without notice or
demand.
10.05 Payment of Expenses, etc.
------------------------
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses of (A) the Agent and NationsBanc Capital Markets, Inc. ("NCMI") in
connection with the negotiation, preparation, execution and delivery and
administration of this Loan Agreement and the other Loan Documents and the
documents and instruments referred to therein (including, without limitation,
the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to
the Agent) and any amendment, waiver or consent relating hereto or thereto
including, but not limited to, any such amendments, waiver or contents resulting
from or related to any work-out, renegotiation or restructure relating to the
performance by the Borrower under this Loan Agreement (including, without
limitation, the reasonable fees and disbursements of counsel for the Agent, all
reasonable consultants' fees and all reasonable travel and other costs
associated with the syndication of the Loans by the Agent and (NCMI) and (B) the
Agent and each Lender in connection with enforcement of the Loan Documents and
the documents and instruments referred to therein (including, without
limitation, the reasonable fees and disbursements of counsel for the Agent or
such Lender); (ii) pay and hold each of the Lenders harmless from and against
any and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Lenders harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Lender) to pay such taxes; (iii)
indemnify each of NCMI and each Lender, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or nor any Lender is a
party thereto) related to the entering into and/or performance of any Loan
Document or the use of proceeds of any Loans (including other extensions of
credit) hereunder or the consummation of any other transactions contemplated in
any Loan Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expense to the extent incurred by reason of gross negligence
or willful misconduct on the part of the Person to be indemnified) and (iv)
exonerate, indemnify, pay and protect, defend (with counsel reasonably approved
by Agent) and save Agent and NCMI harmless from and against and to reimburse
Agent and NCMI for any claims (including, without limitation, third party claims
whether for personal injury or real or personal property damage or otherwise),
actions, administrative proceedings, (including informal proceedings),
judgments, damages, punitive damages, penalties, fines, costs, liabilities
(including sums paid in settlements of claims), interest or losses, including
reasonable attorneys' and
54
<PAGE>
paralegals' fees and expenses (including any such fees and expenses incurred in
enforcing this Agreement or collecting any sums due hereunder), consultant fees,
and expert fees, together with all other costs and expenses of any kind or
nature (collectively, the "Hazardous Materials Costs") that arise directly or
-------------------------
indirectly from or in connection with the presence, suspected presence, release
or suspected release of any Hazardous Material in or into the air, soil,
groundwater or surface water at, on, about, under or within the Property, or
any portion thereof, or elsewhere in connection with the transportation of
Hazardous Materials to or from the Property or any violation by Borrower or its
predecessors or affiliates of any applicable Environmental Law. Without limiting
the generality of the foregoing, the indemnification provided in clause (iv) of
this Section 10.05 shall specifically apply to and include claims or actions
brought by or on behalf of employees of the Borrower, and the Borrower hereby
expressly waives any immunity to which the Borrower may otherwise be entitled
under any industrial or worker's compensation laws. Without limiting the
generality of the foregoing, the indemnification provided by clause (iv) of this
Section 10.05 shall specifically cover Hazardous Materials Costs, including
capital, operating and maintenance costs, incurred in connection with any
investigation or monitoring of site conditions, any cleanup, containment,
remedial, removal or restoration work required or performed by any federal,
state or local governmental agency or political subdivision or performed by any
nongovernmental entity or person because of the presence, suspected presence,
release or suspected release of any Hazardous Material in or into the air, soil,
groundwater or surface water at, on, about, under or within the Property (or any
portion thereof), or elsewhere in connection with the transportation of
Hazardous Materials to or from the Property and any claims of third parties for
loss or damage due to such Hazardous Materials.
10.06 Amendments, Waivers and Consents.
--------------------------------
Neither this Loan Agreement nor any other Loan Document, nor any of the
terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is
approved or consented to in writing by the Required Lenders, provided that no
--------
such amendment, change, waiver, discharge or termination shall, without the
consent of each Lender, (i) extend the scheduled maturities (including the
Maturity Date) of any Loan, or any portion thereof, or reduce the rate or extend
the time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) thereon or fees
hereunder or reduce the principal amount thereof, (ii) release the Pledgor from
its pledge under the Pledge and Security Agreement, (iii) amend, modify or waive
any provision of this Section or Sections 3.02, 3.04, 3.07, 3.08, 4.01, 8.01(a),
10.02, 10.03, 10.05 and 10.09, (iv) reduce any percentage specified in, or
otherwise modify, the definition of Required Lenders or (v) consent to the
assignment or transfer by the Borrower (or the Pledgor) of any of its rights and
obligations under (or in respect of) this Loan Agreement. No provision of
Section 9 may be amended without the consent of the Agent. Any amendment,
change, waiver, discharge or termination in accordance with this Section shall
be effective only in the specific instance and for the specific purpose for
which given.
10.07 Counterparts.
------------
This Loan Agreement may be executed in any number of counterparts, each of
which where so executed and delivered shall be an original, but all of which
shall constitute one and the
55
<PAGE>
same instrument. It shall not be necessary in making proof of this Loan
Agreement to produce or account for more than one such counterpart.
10.08 Headings.
--------
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Loan Agreement.
10.09 Survival.
--------
All indemnities set forth herein, including, without limitation, in Section
10.05 shall survive the execution and delivery of this Loan Agreement, and the
making of the Loans, the repayment of the Loans and other obligations and the
termination of the obligation to extend Loans hereunder.
10.10 Governing Law: Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NORTH CAROLINA. Any legal action of proceeding with respect to this Loan
Agreement or any other Loan Document may be brought in the courts of the
State of North Carolina in Mecklenburg County, or of the United States for
the Western District of North Carolina, and, by execution and delivery of
this Loan Agreement, the Borrower hereby irrevocably accepts for itself and
in respect of its property, generally and unconditionally, the jurisdiction
of such courts. The Borrower further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Borrower at its address for notices pursuant
to Section 10.01 hereof, such service to become effective 30 days after
such mailing. Nothing herein shall affect the right of the Agent to serve
process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against the Borrower in any other
jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Loan
Agreement or any other Loan Document brought in the courts referred to in
subsection (x) hereof and hereby further irrevocably waives and agrees not
to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW EACH OF THE AGENT,
THE LENDERS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION,
56
<PAGE>
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS LOAN
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
10.11 Severability.
-------------
If any provision of any of the Loan Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construcal without giving effect to the illegal, invalid or unenforceable
provisions.
10.12 Entirety.
---------
This Loan Agreement together with the other Loan Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Loan Documents or the transactions
contemplated and therein.
10.13 Survival.
---------
All representatives and warranties made by the Borrower herein shall
survive delivery of the Notes and the making of the Loans hereunder.
10.14 Effectiveness.
--------------
Notwithstanding anything herein to the contrary, while the execution of
this Loan Agreement shall be effective to obligate the Agent and the Lenders to
amend and restate the Prior Agreement upon the occurrence of the Effective Date,
the amendment and restatement of the Prior Agreement described herein shall not
become effective until the Effective Date, and prior to such date the terms and
conditions of the Prior Agreement shall continue in full force and effect.
[Remainder of page intentionally left blank].
57
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amended and Restated Loan Agreement to be duly executed, the Borrower doing
so under seal, and delivered as of the date first above written.
BORROWER: GULF STATES TRANSMISSION SYSTEMS,
- -------- INC., A Delaware corporation
By: By: /s/ Douglas A. Shumate
------------------- ----------------------------
Title: Secretary Douglas A. Shumate
---- Vice President and Chief Financial Officer
(Corporate Seal)
LENDERS: NATIONSBANK, N.A
- ------- individually in its capacity as a Lender and in its
capacity as Agent
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amended and Restated Loan agreement to be duly executed, the Borrower doing
so under seal, and delivered as of the date first above written.
BORROWER: GULF STATES TRANSMISSION SYSTEMS,
- -------- INC., A Delaware corporation
By: By:
------------------ --------------------------
Title: Secretary Doug A. Shumate
----- Vice President and Chief Financial Officer
(Corporate Seal)
LENDERS: NATIONSBANK,N.A.
- ------- individually in its capacity as a Lender and in its
capacity as Agent
By: /s/ Doug Stuart
-------------------------
Name: Doug Stuart
-----------------------
Title: SVP
----------------------
<PAGE>
SCHEDULE 1.01(a)
LENDER INFORMATION
<TABLE>
<CAPTION>
Lender
Lender Percentage
- ------ ----------
<S> <C>
NationsBank, N.A. 100%
Lending Office:
NationsBank, N.A.
Agency Services
NC1-001-15-04
101 North Tryon Street, 15th Floor
Charlotte, North Carolina 28255
Attn: Marie Garcelon
</TABLE>
<PAGE>
SCHEDULE 1.01(b)
APPLICABLE MARGIN
For each of the following types of Loans, the Applicable Margin shall be the
rate per annum set forth under the relevant column heading below:
<TABLE>
<CAPTION>
LIBOR Loans Base Rate Loans
----------- ---------------
<S> <C> <C>
Prior to September 30, 1997 2.25% 1.25%
On or after September 30, 1997 2.50% 1.50%
</TABLE>
<PAGE>
SCHEDULE 1.01(c)
DESCRIPTION OF THE PROJECT
Part I - The Primary System
- ---------------------------
The Primary System is a dual fiber optic cable route from Atlanta, Georgia to
Birmingham, with a linear extension from Birmingham to Shreveport, Louisiana,
and a route from Meridian, Mississippi to Gulfport Mississippi. Meridian is
located along the Birmingham to Shreveport extension. The first
Atlanta-Birmingham route (Atl-Bham Route A) was an existing route owned by MPX
Systems, Inc. which was contributed as equity to the Gulf States Transmission
Systems, Inc. Project. The second Atlanta-Birmingham route is a newly
constructed route from Atlanta to Birmingham (Atl-Bham Route B). Each of these
routes is constructed on power company rights of way using aerial Optical
Protected Ground Wire (OPGW) technology. The Birmingham-Shreveport Route is
constructed using aerial OPGW from Birmingham to Meridian and then buried along
railroad company rights of way from Meridian to Shreveport. The Meridian to
Gulfport route consists of power company fiber that was already installed by
Mississippi Power Company which is being illuminated by Gulf States. The entire
Gulf States Transmission Systems, Inc. project, both the Primary System detailed
above and the Secondary System detailed below, will utilize Northern Telecom
Electronics to illuminate the fiber optic cable.
Part II - The Secondary System
- ------------------------------
The Secondary System is an extension of the Primary System from Atlanta, Georgia
to Gainesville, Georgia. This extension will be constructed using aerial OPGW
along the entire route. The purpose of this extension will be to meet the
network of two independent telephone companies which will bridge the gap between
Gainesville, Georgia and the South Carolina state line. This combined network
will then connect with a 600 mile network throughout the states of North and
South Carolina owned by DukeNet, a subsidiary of Duke Power Company.
Part III - Birmingham, Alabama to Montgomery, Alabama Spur
- ----------------------------------------------------------
The fiber optic route and related electronic equipment between Birmingham
("Wilsonville"), Alabama and Montgomery, Alabama covering approximately 70 route
miles.
<PAGE>
Part IV - Shreveport, Louisiana to Longview, Texas Spur
- -------------------------------------------------------
The fiber optic route and related electronic equipment between Shreveport,
Louisiana and Longview, Texas covering approximately 68 route miles.
Part V - Longview, Texas to Dallas, Texas Spur
- ----------------------------------------------
The planned fiber optic route and related electronic equipment between Longview,
Texas and Dallas, Texas covering approximately 170 route miles. As of the
Closing Date, this route is not operational or under contract.
<PAGE>
SCHEDULE 5.10
LITIGATION
GulfStates FiberNet ("FiberNet") is a defendant in Evergreen Cable & Leasing
-------------------------
Inc. v Signal Point Systems, Inc. and GulfStates FiberNet, which was filed in
- ---------------------------------------------------------
Louisiana state court and removed to United States District Court for the
Western District of Louisiana. The petition in that action asserts that FiberNet
and Signal Point Systems, Inc. ("Signal Point") owe Evergreen Cable & Leasing,
Inc. ("Evergreen") $75,014.94 for work performed by Evergreen on FiberNet-owned
fiber optic cable line pursuant to a subcontract between Evergreen and Signal
Point. Evergreen previously filed a lien in Louisiana against the FiberNet fiber
optic network for the amount claimed in the petition. FiberNet, which
acknowledges that it owes $75,014.94 either to Evergreen or to Signal Point
depending on the outcome of their dispute, has filed a counterclaim
interpleading Evergreen and Signal Point as rival claimants to those funds. In
addition, FiberNet has asserted claims against both Evergreen and Signal Point
for indemnification of all legal expenses, including attorney's fees, incurred
by FiberNet in connection with the action based on indemnification provisions in
the contract between FiberNet and Signal Point and in the subcontract between
Signal Point and Evergreen.
<PAGE>
SCHEDULE 5.22
RECORDINGS AND FILINGS
A. Filings showing the Borrower as Debtor:
--------------------------------------
1. UCC-1 filing in Troup County, Georgia
2. UCC-3 amendment filing in Troup County, Georgia
B. Filings showing the Pledgor as Debtor
-------------------------------------
1. UCC-1 filing in Troup County, Georgia
<PAGE>
SCHEDULE 5.25
HAZARDOUS MATERIALS
None
<PAGE>
SCHEDULE 7.01(a)
INDEBTEDNESS
AS OF JANUARY 31, 1997
1. Accounts Payable for Gulf States FiberNet to Affiliates aggregating
$3,503.00.
2. Accounts Payable for Gulf States Transmission Systems, Inc. to Affiliates
aggregating $16,826.00.
Since January 31, 1997 the outstanding balances referenced in items 1 and 2
above have increased in the ordinary course of business, but the sum of such
balances does not exceed $100,000.
<PAGE>
SCHEDULE 7.02
PERMITTED LIENS
1. A lien in favor of Evergreen Cable & Leasing, Inc. ("Evergreen") in the
amount of $75,014.94 for work performed by Evergreen on a Gulf States
FiberNet-owned fiber optic cable line, as described on Schedule 5.10.
2. Liens in respect of the Borrower's capitalized lease obligations in
connection with the lease from The Southern Company (or an affiliate
thereof) of a portion of its fiber optic telecommunications network running
from Birmingham, Alabama to Montgomery, Alabama (provided that such liens
relate only to the Borrower's ownership interest, if any, in such fiber
optic telecommunications network running from Birmingham, Alabama to
Montgomery, Alabama).
<PAGE>
EXHIBIT 2.02
FORM OF PROMISSORY NOTE
$ March , 1997
--------- ----
FOR VALUE RECEIVED, GULF STATES TRANSMISSION SYSTEMS, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
--------
(the "Bank"), at the office of NationsBank, N.A.,
- ---------------------------
a national banking association, as Agent (the "Agent"), at the address set forth
-----
in the Loan Agreement referred to below (or at such other place or places as the
holder hereof may designate), the principal sum of up to
-----------------------
DOLLARS ($ ) pursuant to the terms and conditions of that
----------------
certain Amended and Restated Loan Agreement dated as of the date hereof among
the Borrower, the Lenders (as defined therein) and the Agent, as amended,
modified or replaced from time to time (as so amended, modified or replaced, the
"Loan Agreement"). All the terms, conditions, definitions and covenants of such
--------------
Loan Agreement are expressly made a part hereof in the same manner and with the
same effect as if set forth herein at length, any holder of this Note being
entitled to the benefits and remedies provided for in the Loan Agreement.
This Note shall bear interest on the outstanding balance hereof as provided
in Section 2.04 of the Loan Agreement and such interest shall be payable as
provided in Section 2.04 of the Loan Agreement. The principal amount of this
Note shall be due and payable as provided in Section 2.03 of the Loan Agreement.
In the event the amounts owing under this Note shall be accelerated in
accordance with the terms of the Loan Agreement or the other Loan Documents, the
amounts owing hereunder shall become immediately due and payable without
presentation, demand, protest or notice of any kind, all of which are hereby
expressly waived. Further, in the event amounts owing hereunder are not paid
when due (including any stated or accelerated maturity), the Borrower agrees to
pay promptly upon demand, in addition to principal, interest and other amounts
owing hereunder, all costs of collection, including reasonable attorneys' fees
and expenses.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
under seal as of the date first above written.
ATTEST: GULF STATES TRANSMISSION SYSTEMS,
INC., a Delaware corporation
By: By:
--------- --------------------------------------
Name: Douglas A. Shumate
--------------------- Vice President and Chief Financial Officer
Title: Secretary
------
(Corporate Seal)
<PAGE>
EXHIBIT 2.05
FORM OF NOTICE OF EXTENSION/CONVERSION
NationsBank, N.A., as Agent
Agency Services, NC1-001-15-04
101 North Tryon Street, 15th Floor
Charlotte, North Carolina 28255
Attention: Marie Garcelon
Ladies and Gentlemen:
The undersigned, GULF STATES TRANSMISSION SYSTEMS, INC. (the "Borrower"),
--------
hereby refers to the Amended and Restated Loan Agreement dated as of
March 27, 1997 (as it may be amended, modified, extended or restated from time
to time, the "Loan Agreement"), among the Borrower, the Lenders identified
--------------
therein and NationsBank, N.A., as Agent (the "Agent"). Capitalized terms used
-----
herein and not otherwise defined herein shall have the meanings assigned to such
terms in the Loan Agreement. The Borrower hereby gives you notice that it
requests a Loan [extension/conversion] pursuant to Section 2.05 of the Loan
Agreement and in that connection sets forth below the terms on which such
[extension/conversion] is requested to be made:
(A) Date of [extension/conversion]
(which is a Business Day)
--------------------
(B) Type of Loan
--------------------
(C) Principal Amount of Loan
--------------------
(D) Interest Rate
--------------------
(E) Interest Period
(if a LIBOR Rate Loan)
--------------------
Upon acceptance of Loan [extension/conversion] made by the Bank in response
to this request, the Borrower shall be deemed to have represented and warranted
that the conditions to [extension/conversion] of Loans specified in the Loan
Agreement have been satisfied, including but not limited to those set forth in
Section 2.05 thereof.
GULF STATES TRANSMISSION SYSTEMS, INC.
By:
---------------------------------------------
Name:
---------------------------------------
Title: President
--------------------------
<PAGE>
EXHIBIT 3.04(f)
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
Reference is hereby made to the Amended and Restated Loan Agreement dated
as of March 27, 1997 among Gulf States Transmission Systems, Inc., the Lenders
party thereto and NationsBank, N.A., as Agent (the "Loan Agreement"). Pursuant
--------------
to Section 3.04 of the Loan Agreement, the undersigned hereby certifies that it
is not a "bank" as such term is used in Section 881(c)(3)(A) of the Internal
Revenue Code of 1986, as amended.
[NAME OF LENDER]
By:
---------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.02(a)
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE>
Form of
Assignment and Acceptance
THIS ASSIGNMENT AND ACCEPTANCE, dated as of March ___, 1997 is entered
into between ___________ ("Assignor") and NATIONSBANK, N.A. ("Assignee").
Reference is made to the Loan Agreement dated as of July 25, 1995, as
amended and modified from time to time thereafter (the "Loan Agreement") among
--------------
Gulf States FiberNet, the Lenders party thereto and NationsBank, N.A. (formerly
known as NationsBank, N.A. (Carolinas)), as Agent and as a Lender. Terms
defined in the Loan Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse except for
inaccuracies regarding the representation and warranty set forth in the next
succeeding sentence, to the Assignee, and the Assignee hereby purchases and
assumes, without recourse except for inaccuracies regarding the representation
and warranty set forth in the next succeeding sentence, from the Assignor,
effective upon receipt by the Assignor of the purchase price relating thereto
(such purchase price to consist of the outstanding principal amounts, and any
other amounts, owing to the Assignor under the Loan Agreement with respect
thereto, as agreed between the Assignor and the Assignee) on the effective date
set forth below (the "Effective Date"), the interests set forth below (the
--------------
"Assigned Interest") in the Assignor's rights and obligations under the Loan
-----------------
Agreement. The Assignor represents and warrants that it is the legal and
beneficial owner of the Assigned Interest and that the Assigned Interest is free
and clear of any adverse claim. Each of the Assignor and the Assignee hereby
makes and agrees to be bound by all the representations, warranties and
agreements set forth in Section 10.03(b) of the Loan Agreement, a copy of which
has been received by each such party; provided, however, that the Assignor shall
-------- -------
not be required to pay the Agent $2500 as a transfer fee as required thereunder,
such transfer fee having been waived by the Agent as evidenced by the Agent's
acknowledgment of this Assignment and Acceptance. From and after the Effective
Date (i) the Assignee, if it is not already a Lender under the Loan Agreement,
shall be a party to and be bound by the provisions of the Loan Agreement and, to
the extent of the interests assigned by this Assignment and Acceptance, have the
rights and obligations of a Lender thereunder and (ii) the Assignor shall, to
the extent of the interests assigned by this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Agreement.
2. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of North Carolina.
3. Terms of Assignment
(a) Date of Assignment: March ___, 1997
(b) Legal Name of Assignor: _________________________
(c) Legal Name of Assignee: NationsBank, N.A.
<PAGE>
(d) Effective Date of Assignment: , 1997
--------
(e) Original Principal Amount of
Term Loan A Assigned: $13,421,052.63
(f) Original Principal Amount of
Term Loan B Assigned: $1,578,947.37
(g) Total Original Principal Amount
of Loans Assigned $15,000,000.00
See Schedule I attached for a description of the Loans (and the percentage
----------
interests therein and relating thereto) which are the subject of this Assignment
and Acceptance.
4. On the Effective Date and concurrently with the delivery by the
Borrower of new promissory notes in the original principal amounts set forth
below, the Assignor shall surrender to the Borrower the promissory notes it
currently holds (which promissory notes are dated March 29, 1996 and in the
principal amounts set forth with respect to the Assignor on the attached
Schedule I under the heading "Term Loans Prior to Assignment").
New Promissory Notes To Be Issued by the Borrower
-------------------------------------------------
1. Term Loan A Note to Assignee: $42,500,000*
2. Term Loan B Note to Assignee: $5,000,000*
* After giving affect to the Assignment and Acceptance dated as of
hereof between ___________ and the Assignee; provided, however, that if
-------- -------
the Loan Agreement is amended and restated effective as of the Effective
Date, new promissory notes shall be issued by the Borrower in accordance
with the terms of the Loan Agreement as amended and restated.
The terms set forth above
are hereby agreed to:
, as Assignor
- -------------------
By:
--------------------------------
Title:
----------------------------
NATIONSBANK, N.A. as Assignee
By:
--------------------------------
Title:
----------------------------
-2-
<PAGE>
ACKNOWLEDGMENT OF NOTICE:
NATIONSBANK, N.A. (formerly known as
NationsBank, N.A. (Carolinas)), as Agent
By:
-------------------------------------
Title:
----------------------------------
GULF STATES FIBERNET,
as Borrower
By:
-------------------------------------
Title:
----------------------------------
-3-
<PAGE>
EXHIBIT 4.02(b)
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment"), dated as of
----------
March 18, 1997, is by and between GULF STATES FIBERNET, a Georgia general
partnership, as assignor (the "Assignor"), and GULF STATES TRANSMISSION SYSTEMS,
--------
INC., A Delaware corporation, as assignee (the "Assignee").
--------
WHEREAS, the Assignor entered into that certain Loan Agreement dated as of
July 25, 1995 (as amended and modified, the "Loan Agreement") with the Lenders
--------------
party thereto and NationsBank, N.A. (formerly known as NationsBank, N.A.
(Carolinas)), as Agent for the Lenders (the "Agent") and certain other Loan
-----
Documents (as defined in the Loan Agreement) in connection therewith as more
particularly described in Schedule I attached hereto (collectively, as amended
or modified, the "Assigned Agreements");
-------------------
WHEREAS, the Assignor has agreed to assign to the Assignee all of its
rights, interests, duties, obligations and liabilities in, to and under the
Assigned Agreements;
WHEREAS, the Assignee desires to accept the assignment of all of the
Assignor's rights, interests, duties, obligations and liabilities in, to and
under the Assigned Agreements; and
WHEREAS, immediately following the assignment and assumption of the
Assigned Agreements pursuant to this assignment, (i) ITC Holding Company, Inc.
shall acquire SCANA Communications, Inc.'s general partnership interest in the
Assignor (the "Partnership Interest") and shall transfer the Partnership
--------------------
Interest to the Assignee, and (ii) upon receipt of the Partnership Interest, the
Assignee shall hold all of the partnership interests in the Assignor and, by
operation of law, the Assignor shall be dissolved as a partnership and all of
the assets of the Assignor (the "FiberNet Assets") including, without
---------------
limitation, the Project Contracts more particularly described in Schedule II
attached hereto (the "Project Contracts"), shall become assets of the Assignee;
-----------------
and
WHEREAS, the Assignee desires to acknowledge that upon such receipt it
will own such right, title and interest in and to the FiberNet Assets
(including, without limitation, the Project Contracts) as was owned by the
Assignor immediately prior to such receipt.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt of which are hereby acknowledged, the
parties hereto agree as follows:
1. Assignment of Assigned Agreements. The Assignor hereby assigns,
---------------------------------
transfers and conveys to the Assignee all of its rights, interest, duties,
obligations and liabilities in, to and under the Assigned Agreements.
2. Assumption of Assigned Agreements. The Assignee hereby accepts the
---------------------------------
assignment contained in Section 1 and assumes all of the duties, obligations and
liabilities of the Assignor in, to and under the Assigned Agreements to the same
extent as if the Assignee had executed the Assigned Agreements. The Assignee
hereby agrees to be bound by the terms and
<PAGE>
provisions of the Assigned Agreements and accepts all of the Assignor's rights,
interests, duties, obligations and liabilities thereunder.
3. Agreement to be Bound by Project Contracts. Immediately following the
------------------------------------------
assignment and assumption of the Assigned Agreements pursuant to Sections 1 and
2 above, respectively, and effective upon receipt from ITC Holding Company, Inc.
of the Partnership Interest, the Assignee acknowledges that the Assignor shall
have been dissolved by operation of law and the Assignee shall own such right,
title and interest in and to the FiberNet Assets (including, without limitation,
the Project Contracts) as was owned by the Assignor immediately prior to such
receipt. The Assignee hereby agrees to be bound by the terms and provisions of
the Project Contracts and accepts all of the Assignor's rights, interests,
duties, obligations and liabilities thereunder.
4. No Modifications. Nothing contained in this Assignment shall amend or
----------------
modify, or be deemed to amend or modify, the Assignment Agreements.
5. Governing Law. This Assignment shall in all respects be governed by,
-------------
and construed in accordance with, the internal substantive laws of the State of
North Carolina, including all matters of construction, validity or
interpretation of this Assignment.
6. Counterparts. This Assignment may be executed in several
------------
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute one and the same instrument.
7. Binding Nature. This Assignment shall be binding upon and inure to
--------------
the benefit of the parties hereto and their successors and assigns.
[The remainder of this page has been intentionally left blank]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment as of the date set forth above.
ASSIGNOR: GULF STATES FIBERNET,
a Georgia general partnership
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
ASSIGNEE: GULF STATES TRANSMISSION SYSTEMS,
INC., a Delaware corporation
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Acknowledged and Agreed to:
NATIONSBANK, N.A., as Agent
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
Schedule I
to
Assignment and Assumption Agreement
Description of Assigned Agreements
----------------------------------
1. Loan Agreement dated as of July 25, 1995 among Gulf States FiberNet, the
Lenders party thereto and NationsBank, N.A. (formerly known as NationsBank, N.D.
(Carolinas)), as Agent for the Lenders, as amended by that certain First
Amendment to Loan Agreement dated as of December 29, 1995, that certain Second
Amendment to Loan Agreement dated as of March 29, 1996 and that certain Third
Amendment to Loan Documents dated as of September 27, 1996.
2. Term Loan A Promissory Notes dated March 29, 1996 in the following
amounts and payable to the following payees:
(a) $15,657,894.74 Note payable to NationsBank, N.A.
(b) $13,421,052.63 Note payable to The Fuji Bank, Limited
3. Term Loan B Promissory Notes dated March 29, 1996 in the following
principal amounts and payable to the following payees:
(a) $1,842,105.26 Note payable to NationsBank, N.A.
(b) $1,578,947.37 Note payable to The Fuji Bank, Limited
4. Term Loan A Promissory Note dated December 21, 1995 in the principal
amount of $13,421,052.63 payable to MeesPierson N.V.
5. Term Loan B Promissory Note dated December 21, 1995 in the principal
amount of $1,578,947.37 payable to MeesPierson N.V.
6. Security Agreement dated as of July 25, 1995 between Gulf States
FiberNet and NationsBank, N.A. (formerly known as NationsBank, N.A.
(Carolinas)), as Agent for the Lenders, as amended by that certain Third
Amendment to Loan Documents dated as of September 27, 1996.
7. Those certain Assignments dated as of July 25, 1995 executed by Gulf
States FiberNet in connection with the Project contracts (as defined in the
Loan Agreement referred to in item number 1 above) and naming NationsBank, N.A.
(formerly known as NationsBank, N.A. (Carolinas)) as Agent for the Lenders, as
assignee.
8. Those certain Consent and Agreements dated as of July 25, 1995 executed
by Gulf States FiberNet's counterparties in connection with the Specified
Project Contracts (as defined in the Loan Agreement referred to item number 1
above) and acknowledging an assignment of a
<PAGE>
Specified Project Contract to NationsBank, N.A. (formerly known as NationsBank,
N.A. (Carolinas)), as Agent for the Lenders, as assignee.
9. ISDA Master Agreement, the Schedule and the Confirmation thereto, each
dated as of January 17, 1995, between Gulf States FiberNet and NationsBank,
N.A. (formerly known as NationsBank, N.A. (Carolinas)) relating to interest rate
swap transactions.
10. All other documents and agreements, if any, given by Assignor in
connection with the Loans (as defined in the Loan Agreement referred to in item
number 1 above (the "Loan Agreement") or pursuant to the Loan Agreement.
Schedule 1, Page 2
<PAGE>
Schedule II
to
Assignment and Assumption Agreement
Description of Project Contracts
--------------------------------
1. Telecommunications System Agreement dated January 26, 1995 between
Interstate FiberNet and Sprint Communications Company L.P., which was
assigned by Interstate FiberNet to Gulf States FiberNet pursuant to that
certain Assignment of Contract dated as of March 21, 1995 from
Interstate FiberNet to Gulf States FiberNet and that certain Assumption
dated as of March 21, 1995 by Gulf States FiberNet accepting such
Assignment of Contract, as the same may be amended or modified from time
to time.
2. Telecommunications System Maintenance Agreement dated as of January 26,
1995 between Interstate FiberNet and Sprint Communications Company L.P.,
which was assigned by Interstate FiberNet to Gulf States FiberNet
pursuant to an Assignment dated as of July 25, 1996, as the same may be
amended or modified from time to time.
3. Sprint Communications Company Facilities and Services Agreement dated
January 26, 1995 between Sprint Communications Company L.P. and
Interstate FiberNet, which was assigned by Interstate FiberNet to Gulf
States FiberNet in accordance with an Assignment dated as of July 25,
1995, as the same may be amended or modified from time to time.
4. Specifications for Maintenance of Fiber Regenerator Sites, which was
assigned by Interstate FiberNet to Gulf States FiberNet pursuant to an
Assignment dated as of March 21, 1995, setting forth Interstate
FiberNet's performance obligations regarding all regenerator sites along
the fiber cable route from Atlanta, Georgia, to Shreveport, Louisiana,
as the same may be amended or modified from time to time.
5. Agreement for Use and Non-Disclosure of Confidential Information dated
as of June 6, 1994 between MPX Systems, Inc. and Sprint Communications
Company L.P., as the same may be amended or modified from time to time.
6. Operating Agreement dated as of August 11, 1994 between Gulf States
FiberNet and Illinois Central Railroad Company, as the same may be
amended or modified form time to time.
7. Term Agreement dated as of August 11, 1994 between Gulf States FiberNet
and Illinois Central Railroad Company, as the same may be amended or
modified from time to time.
8. Revised and Restated Fiber Optic Facilities and Services Agreement dated
as of June 9, 1995 by and between Southern Development and Investment
Group, Inc., on behalf of itself and as agent for Alabama Power Company,
Georgia Power Company, Gulf Power
<PAGE>
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,
as the same may be amended or modified from time to time.
9. Operating Agreement dates as of August 17, 1994 by and between Gulf
States FiberNet and Kansas City Southern Railway Company, as the same may
be amended or modified from time to time.
10. Fiber Optic Facility Lease Agreement dated as of January 31, 1997 between
Southern Telecom 1 and Gulf States FiberNet (originally signed by
Interstate FiberNet and assigned effective the same day to Gulf States
FiberNet).
11. Fiber System Lease Agreement dated as of January 30, 1996 between CSW
Communications, Inc. and Gulf States FiberNet.
12. 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.).
13. The agreement relating to the Longview, Texas to Dallas, Texas spur of
the Project (as defined in the Loan Agreement referred to in Assignment
and Assumption Agreement), if and when such agreement is executed.
14. All other contracts and agreements relating to the construction,
installation, reconstruction, operation, maintenance, repair of or
otherwise relating to the Project (as defined in the Loan Agreement
referred to in the Assignment and Assumption Agreement).
Schedule II, Page 2
<PAGE>
EXHIBIT 6.01(d)
FORM OF BORROWER CERTIFICATE
I, , chief financial officer of GULF STATES TRANSMISSION
------------
SYSTEMS, INC. (the "Borrower"), hereby certify that, to the best of my knowledge
with respect to that certain Amended and Restated Loan Agreement dated as of
March 27, 1997, among the Borrower, the Lenders identified therein and
NationsBank, N.A., as Agent (the "Loan Agreement"; all defined terms in the Loan
Agreement are incorporated herein by reference):
1. The Borrower has kept, observed, performed and fulfilled each and
every agreement binding on it contained in the Loan Agreement and
the other Loan Documents to which it is a party; and
2. The Borrower is not at this time in default in the keeping,
observance, performance or fulfillment of any of the terms,
provisions and conditions of any of the Loan Agreement and the
other Loan Documents to which it is a party; and
3. Since (the date of the last similar
-------------------
certification) (check as applicable):
(a) No Default or Event of Default as specified in
----------- Section 8 has occurred.
(b) A Default or Event of Default as specified in
Section 8 has occurred. The nature and period of
existence thereof and the action the Borrower
proposes to take with respect thereto are set out
below:
4. The Borrower is in compliance with the financial covenants
contained in Section 6.11 as demonstrated by the calculations
attached hereto.
Executed under seal this the day of , 1997.
-------- ---------------------
(SEAL)
---------------------------
Douglas A. Shumate, Chief Financial Officer of
GULF STATES TRANSMISSION SYSTEMS,
INC.
<PAGE>
EXHIBIT 8.01(iv)(A)
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT
----------
KNOW ALL MEN BY THESE PRESENTS, that GULF STATES TRANSMISSION
SYSTEMS, INC., a Delaware corporation (the "Borrower"), for valuable
--------
consideration, receipt of which is hereby acknowledged, has sold, assigned,
transferred, conveyed and set over and does hereby sell, assign, transfer,
convey and set over unto NATIONSBANK, N.A., its successors and assigns, as agent
(in such capacity, the "Agent"), its successors and assigns under that certain
-----
amended and restated loan agreement dated as of March 27, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Loan Agreement";
--------------
capitalized terms used herein that are defined in the Loan Agreement shall have
the meanings set forth in the Loan Agreement, unless otherwise defined herein)
among the Borrower, the Lenders and the Agent, all the right, title and interest
of the Borrower in, to and under (including all moneys due and to become due to
the Borrower under), and does hereby grant to the Agent, for the benefit of the
Lenders, a first priority security interest in, the following agreement
(hereinafter referred to as the "Assigned Agreement"):
------------------
[Describe Project Contract with (the "Contract Party")]
----------------- --------------
1. Collateral. This Assignment is made as collateral security for all
----------
obligations of the Borrower as defined in the Amended and Restated Loan
Agreement and is subject to all of the terms and conditions of the
Security Agreement dated as of March 27, 1997 between the Borrower and
the Agent (herein, as the same may be amended, supplemented or otherwise
modified from time to time, called the "Security Agreement"). All the right,
------------------
title and interest of the Borrower in, to and under the Assigned Agreement shall
from the date hereof constitute part of the Collateral as defined in the
Security Agreement, for all purposes of the Security Agreement.
2. Payments. The Borrower hereby irrevocably authorizes and directs
--------
the Contract Party, upon such Contract Party's receipt of written notice from
the Agent that an Event of Default under the Loan Agreement has occurred, to pay
all monies due and to become due under or by reason of the Assigned Agreement
directly to the Agent or to such other Person or in such other manner as the
Agent may hereafter from time to time specify to the Contract Party in writing,
until such time as the Agent shall notify the Contract Party that this
Assignment has been terminated and released.
<PAGE>
3. No Direct Obligation.
--------------------
(a) Except as expressly stated herein, neither this Assignment, nor
the receipt by the Agent or any Lender of any payments pursuant
hereto, shall cause the Agent or any Lender to be under any
obligation to the Borrower or the Contract Party for the performance
or observance of any of the representations, warranties, terms or
conditions of the Assigned Agreement.
(b) Notwithstanding this Assignment, (i) the Borrower shall be and
remain obligated to the Contract Party to perform all of the
Borrower's obligations and agreements under the Assigned Agreement,
and (ii) the Contract Party shall be and remain obligated to the
Borrower to perform all of its obligations and agreements under the
Assigned Agreement.
4. Notice Copies. The Borrower agrees to deliver to the Agent at the
-------------
address provided for the Agent in the Loan Agreement (i) a copy of each material
notice, demand or request sent by it to the Contract Party with respect to the
Assigned Agreement, concurrently with the delivery thereof to the Contract
Party, and (ii) a copy of each material notice, demand or request received by it
from the Contract Party with respect to the Assigned Agreement, promptly after
its receipt thereof from the Contract Party.
5. No Consents. The Borrower will not consent or agree to any
-----------
amendment, supplement or other modification of, or waiver or consent with
respect to any provision of, the Assigned Agreement without the prior written
consent of the Agent.
6. Power of Attorney. The Borrower does hereby irrevocably constitute
-----------------
and appoint the Agent its true and lawful attorney-in-fact with full and
irrevocable power and authority in the place and stead of the Borrower and in
the name of the Borrower or in the name of the Agent, for the purpose of
carrying out the terms of this Assignment and the Security Agreement, to take
any and all action and to execute any and all instruments which may be necessary
to accomplish the purposes of this Assignment. This power-of-attorney is a power
coupled with an interest and shall be irrevocable.
7. No Prior Assignment. The Borrower hereby represents and warrants
-------------------
that it has not heretofore assigned or otherwise disposed of or encumbered any
right, title or interest of the Borrower in, to or under the Assigned Agreement
or any moneys due or to become due to the Borrower under or by reason thereof,
and that the Borrower has the right and power to transfer to the Agent, for the
benefit of the Lenders, absolute title to the Borrower's right, title and
interest in, to and under the Assigned Agreement and in and to all the moneys
due and to become due to the Borrower under the Assigned Agreement.
8. Benefits and Remedies. All the terms, conditions, definitions and
---------------------
covenants of the Loan Agreement are expressly made a part hereof in the same
manner and with the same effect as if set forth herein at length, the Agent
being entitled to the benefits and remedies provided for in the Loan Agreement.
<PAGE>
9. Governing Law. This Assignment shall be governed by and construed
-------------
in accordance with the laws of the State of North Carolina.
10. Effectiveness of Assignment. This Assignment shall be effective
---------------------------
upon the execution of the Loan Agreement and the making of the Loans thereunder.
IN WITNESS WHEREOF, the Borrower has caused this Assignment to be
duly executed under seal and delivered as of , 1997.
---------------
GULF STATES TRANSMISSION SYSTEMS,
INC., a Delaware corporation
[SEAL APPEARS HERE]
By
-------------------------------
Name:
Title: President
------------
<PAGE>
EXHIBIT 8.01(iv)(B)
FORM OF CONSENT AND AGREEMENT
The undersigned, [name], a [type of entity] (the "Contract
--------- -------- --------
Party"), hereby consents to and acknowledges notice of the Assignment of the
- -----
[describe the relevant Project Contract] (the "Assignment", a
- ---------------- ----------
copy of which is attached hereto) from GULF STATES TRANSMISSION SYSTEMS, INC., a
Delaware corporation (the "Assignor"), to NATIONSBANK, N.A., as Agent (in such
--------
capacity, the "Agent") under that certain amended and restated loan agreement
-----
dated as of March 27, 1997 (as amended, supplemented or otherwise modified from
-------
time to time, the "Loan Agreement"; capitalized terms used herein that are
--------------
defined in the Loan Agreement shall have the meanings set forth in the Loan
Agreement, unless otherwise defined herein) among the Assignor, the Lenders and
the Agent, of all right, title and interest of the Assignor in, to and under the
[describe the relevant Project Contract] (as the same may be amended,
- -----------
supplemented or otherwise modified from time to time, the "Assigned Agreement").
------------------
The Contract Party hereby confirms to and agrees with the Agent, for the benefit
of the Lenders, and anything in the Assigned Agreement to the contrary
notwithstanding:
1. Direct Payment. Upon receipt of written notice from the Agent that
--------------
an Event of Default under the Loan Agreement has occurred, the Contract Party
will pay all moneys, if any, due and to become due to the Assignor under the
Assigned Agreement directly to the Agent or to such other person or in such
other manner as the Agent may from time to time specify in writing to the
Contract Party, without offset, abatement, withholding or reduction.
2. No Direct Obligation. Neither the Agent nor the Lenders shall be
--------------------
liable for the performance or observance of any of the obligations or duties of
the Assignor under the Assigned Agreement, nor shall the Assignment give rise to
any duties or obligations whatsoever on the part of the Agent or the Lenders
owing to the Contract Party except that, insofar as the Agent or any Lender
exercises any of its rights under the Assigned Agreement or makes any claims
with respect to any payments, deliveries or other obligations under the Assigned
Agreement, the terms and conditions of the Assigned Agreement applicable to such
exercise of rights or such claims shall apply to, and be binding upon, the Agent
or the Lender to the same extent as the Assignor.
3. Exercise of Rights. After the delivery by the Agent to the
------------------
Contract Party of written notice stating that an Event of Default (as such term
is defined in the Loan Agreement) has occurred and is continuing, the Agent or
any Lender shall be entitled, in the place and stead of the Assignor, to
exercise any and all rights of the Assignor under the Assigned Agreement in
accordance with the terms of the Assigned Agreement, as the Assigned Agreement
may be modified by the terms hereof. Upon any transfer of the rights of the
Agent and the Lenders under the Assigned Agreement pursuant to the exercise of
the remedies of the Agent or any Lender under the Assignment, (i) the transferee
shall succeed to all right, title and interest of the Assignor, the Lenders and
the Agent under the Assigned Agreement, and (ii) the Agent and the Lenders shall
have no further liabilities, duties or obligations to the Contract Party under
the Assignment or the Assigned Agreement.
<PAGE>
4. Consent. The Contract Party will not amend or supplement the
-------
Assigned Agreement without the prior written consent of the Agent. Without
limiting the generality of the foregoing, it is understood that it is Assignor's
obligation to seek such consent.
5. Waiver. In connection with the Assigned Agreement, the Contract
------
party hereby waives any and all rights it has under the Assigned Agreement to
prohibit an assignment of or transfer of assets or interest under the Assigned
Agreement by either Assignor or Agent including, but not limited to, the right
to receive any remuneration or payment in connection with the Contract Party
granting a consent to any such assignment or transfer. Furthermore, the Contract
Party hereby expressly agrees that the Agent, upon the occurrence of an Event of
Default (as such term is defined under the Loan Agreement) under the Loan
Agreement by Assignor, may assign, sell or otherwise transfer any or all of the
right, title or interest of the Agent in, to or under the Assigned Agreement to
any third party without the consent of the Contract Party.
6. Notice Copies. The Contract Party shall furnish to the Agent at
-------------
its address located at Agency Services, NCI-001-15-04, 101 North Tryon Street,
15th Floor, Charlotte, North Carolina 28255, Attention: Marie Garcelon (with a
copy to NationsBank of Texas, N.A., Communications Finance Group, 901 Main
Street, 64th Floor, Dallas, Texas 75202, Attention: Doug Stuart), concurrently
with the delivery thereof to the Assignor, a copy of each notice or demand
delivered by the Contract Party to the Assignor under the Assigned Agreement.
Such notice shall be deemed given when received by the Agent at the above
address and properly addressed.
7. Opportunity to Cure. The Contract Party agrees that,
-------------------
notwithstanding any right it may have under the Assigned Agreement, at law, in
equity or otherwise, it shall not terminate the Assigned Agreement unless (a) it
shall have given the Agent the longer of (i) the time to cure given the Assignor
in the Assigned Agreement and (ii) 180 days from the date the Contract Party has
given notice to the Agent of the default or condition and (b) the Assignor, the
Agent or any Lender shall not cure or cause to be cured the default or condition
giving rise to such right of termination within such time period; provided,
--------
however, that if the Agent shall cure or cause to be cured all defaults or
- -------
conditions that are susceptible of being cured by the Agent, then any default or
condition that is not susceptible of being cured by the Agent shall no longer be
deemed to be a default under the Assigned Agreement or a condition that entitles
the Contract Party to terminate the Assigned Agreement.
8. Obligation to Execute New Contract. Without limiting the
----------------------------------
provisions of Section 7 hereof, if before the Agent has assumed the Assigned
Agreement the Contract Party shall have obtained the right under such Assigned
Agreement to terminate the Assigned Agreement, then, concurrent with any
termination of the Assigned Agreement by the Contract Party, the Contract Party
and the Agent, or the designee of the Agent, shall be deemed to have
automatically entered into a new contract with terms identical to the Assigned
Agreement. Such new contract will be reduced to writing as soon as is reasonably
practicable.
<PAGE>
9. Representations and Warranties. The Contract Party hereby
------------------------------
represents and warrants that (a) it is a [type of entity] duly formed and
--------
validly existing and in good standing under the laws of the State of ,
----------
(b) the Assigned Agreement is in full force and effect on the date hereof and
the Assigned Agreement and this Consent and Agreement constitute valid and
binding obligations of the Contract Party enforceable in accordance with their
respective terms except as enforceability may be limited by general principles
of equity and by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the rights of creditors generally, (c) no consent,
license, approval or authorization of, or filing, registration or declaration
with, or exemption by, any governmental body, bureau or agency or any other
person is required in connection with the execution, delivery and performance by
the Contract Party of the Assigned Agreement or this Consent and Agreement,
where the failure to have obtained such approval, consent, license, filing,
registration, declaration, exemption or authorization would have a material,
adverse effect upon the Contract Party's operations to date or its ability to
perform its obligations under the Assigned Agreement or this Consent and
Agreement, except for (i) those which have been duly obtained and are in full
force and effect, (ii) those which are not required to be obtained or made as of
the date hereof and as to which the Contract Party has no reason to believe
cannot or will not be obtained or made in the normal course of business as and
when required, (iii) those which may not be transferable in the normal course of
business (e.g. permits, leases and licenses) as to which the Contract Party has
no reason to believe that consent for transfer will not be obtainable and (iv)
those which have been expressly excluded from a representation and warranty in
the Assigned Agreement, (d) the representations and warranties of the Contract
Party contained in the Assigned Agreement are true and correct on the date
hereof with the same effect as if made on and as of the date hereof, (e) the
Contract Party has duly complied with all agreements and conditions contained in
the Assigned Agreement required to be performed or complied with by it prior to
the date hereof and (f) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or threatened against or
affecting the Contract Party or, to the best knowledge of the Contract Party or
against or affecting any of its properties, rights, revenues or assets.
10. Successors and Assigns. This Consent and Agreement shall be
----------------------
binding upon, and inure to the benefit of, the successors and assigns of the
Contract Party and shall be binding upon, and inure to the benefit of, the
Agent, the Lenders and their respective successors and assigns.
11. Counterparts. This Consent and Agreement may be executed in any
------------
number of counterparts, each of which where so executed and delivered shall be
an original, but all of which shall constitute one and the same instrument.
12. Governing Law. This Consent and Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of North Carolina.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Consent and
Agreement to be duly executed, the Contract Party doing so under seal, and
delivered as of , 1997.
----------------
, a
------------- ------------------
By:
-------------------------------
Title:
Accepted:
NATIONSBANK, N.A.,
as Agent
By:
-------------------------------
Title:
<PAGE>
Exhibit 10.11
PROMISSORY NOTE
$41,600,000 March 27, 1997
FOR VALUE RECEIVED, GULF STATES TRANSMISSION SYSTEMS, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
--------
NationsBank, N.A. (the "Bank"), at the office of NationsBank, N.A., a national
banking association, as Agent (the "Agent"), at the address set forth in the
Loan Agreement referred to below (or at such other place or places as the holder
hereof may designate), the principal sum of up to FORTY-ONE MILLION SIX HUNDRED
THOUSAND AND NO/100s DOLLARS ($41,600,000.00) pursuant to the terms and
conditions of that certain Amended and Restated Loan Agreement dated as of the
date hereof among the Borrower, the Lenders (as defined therein) and the Agent,
as amended, modified or replaced from time to time (as so amended, modified or
replaced, the "Loan Agreement"). All the terms, conditions, definitions and
--------------
covenants of such Loan Agreement are expressly made a part hereof in the same
manner and with the same effect as if set forth herein at length, any holder of
this Note being entitled to the benefits and remedies provided for in the Loan
Agreement.
This Note shall bear interest on the outstanding balance hereof as provided
in Section 2.04 of the Loan Agreement and such interest shall be payable as
provided in Section 2.04 of the Loan Agreement. The principal amount of this
Note shall be due and payable as provided in Section 2.03 of the Loan Agreement.
In the event the amounts owing under this Note shall be accelerated in
accordance with the terms of the Loan Agreement or the other Loan Documents, the
amounts owing hereunder shall become immediately due and payable without
presentation, demand, protest or notice of any kind, all of which are hereby
expressly waived. Further, in the event amounts owing hereunder are not paid
when due (including any stated or accelerated maturity), the Borrower agrees to
pay promptly upon demand, in addition to principal, interest and other amounts
owing hereunder, all costs of collection, including reasonable attorneys' fees
and expenses.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
under seal as of the date first above written.
ATTEST: GULF STATES TRANSMISSION SYSTEMS,
INC., a Delaware corporation
By: /s/ J. Douglas Cox By: /s/ Douglas A. Shumate
----------------------------- -----------------------------
Name: J. Douglas Cox Douglas A. Shumate
--------------------------- Vice President and Chief
Title: Secretary Financial Officer
---------------
(Corporate Seal)
<PAGE>
Exhibit 10.12
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement" or "Security
--------- --------
Agreement") dated as of March 27, 1997, is by and between
- ---------
GULF STATES TRANSMISSION SYSTEMS, INC., a Delaware corporation (the
"Borrower"); and
--------
NationsBank, N.A., a national banking association, as Agent for the Lenders
referred to below (the "Agent").
-----
W I T N E S S T H:
- - - - - - - - -
WHEREAS, Gulf States FiberNet, a Georgia general partnership ("FiberNet"),
--------
and the Agent are parties to a Security Agreement dated as of July 25, 1995 (as
amended and modified prior to the Effective Date (as defined in the Loan
Agreement referred to below), the "Prior Security Agreement");
------------------------
WHEREAS, the Borrower as of the Effective Date will have assumed all of
FiberNet's rights and obligations under the Prior Security Agreement pursuant to
the terms of the Assignment and Assumption Agreement (as defined in the Loan
Agreement referred to below);
WHEREAS, the Lenders have agreed to make certain loans (hereinafter, the
"Loans") to the Borrower on the Effective Date pursuant to the terms of an
-----
amended and restated loan agreement dated as of the date hereof among the
Borrower, the Lenders party thereto and the Agent (as amended and modified from
time to time, the "Loan Agreement") and as evidenced by promissory notes of the
--------------
Borrower dated as of the date hereof in the aggregate original principal amount
of $41,600,000 (as amended, modified, extended, renewed or replaced from time
to time, the "Notes");
-----
WHEREAS, the Lenders have required as a condition to the making of the
Loans pursuant to the Loan Agreement, among other things, that the Borrower
grant to the Agent a lien on and security interest in certain property more
particularly described herein, such lien and security interest to become
effective on the Effective Date;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree to amend and restate the Prior Security
Agreement as follows, such amendment and restatement to become effective on the
Effective Date:
1 . Definitions. Terms used but not otherwise defined herein shall have
-----------
the meanings provided in the Loan Agreement; provided, however, that terms which
-------- -------
are defined in the Code
<PAGE>
(as hereinafter defined) shall have the meaning provided in the Code unless
specifically provided otherwise herein or in the Loan Agreement. As used herein:
"Code" means such term as defined in Section 3(f) hereof.
----
"Collateral" means such term as defined in Section 2 hereof.
----------
"Default" means an event or condition which upon notice or lapse of
-------
time, or both, would constitute an Event of Default.
"Default Rate" means such term as defined in Section 3(g) hereof.
------------
"Event of Default" means such term as defined in Section 4 hereof.
----------------
"Loans" means such term as defined in the Recitals hereto.
-----
"Loan Agreement" means such term as defined in the Recitals hereto.
--------------
"Permitted Liens" means such term as defined in Section 3(d) hereof.
---------------
"Secured Obligations" means (i) all indebtedness, obligations and
-------------------
liabilities of the Borrower under or in connection with
(A) the Loan Agreement, the Notes, the Swap Documents, this
Security Agreement or any other of the Loan Documents, or
(B) any other indebtedness or liabilities of any kind or nature,
heretofore, now or hereafter owing, arising, due or payable from the
Borrower to the Lenders, howsoever evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct, contingent,
fixed, or joint and several,
in each case whether now existing or hereafter arising, due or to become
due, direct or indirect, absolute or contingent, and howsoever evidenced,
held or acquired, and (ii) all expenses and charges, legal and otherwise,
reasonably incurred by the Agent or any Lender in collecting or enforcing
any of such indebtedness, obligations and liabilities or in realizing on or
protecting any security therefor, including without limitation the security
afforded hereunder, together with any and all modifications, extensions,
renewals and/or substitutions thereof.
2. Grant of Security Interest in the Collateral. To secure the prompt
--------------------------------------------
payment or performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, the Borrower hereby grants, such grant
to become effective on the Effective Date, to the Agent, for the benefit of the
Lenders, a security interest in and a right to set off against, and acknowledges
and agrees that on the Effective Date the Agent will have and shall continue to
have a continuing security interest in and a right of set off against, any and
all right, title and
2
<PAGE>
interest of the Borrower in and to the following, whether now owned or existing
or owned, acquired or arising hereafter, subject to the last paragraph of this
Section 2 (collectively, the "Collateral"):
----------
(a) All equipment, including, without limitation, machinery, tools,
furniture, furnishings, office equipment and trade fixtures;
(b) All accounts and receivables and all goods represented by or securing
accounts and receivables;
(c) All inventory, including, without limitation, all raw materials, all
work in process and all goods held for sale or lease;
(d) All agreements, contracts, leases, tax sharing agreements or hedging
arrangements (including, without limitation, the Swap Documents) now
or hereafter entered into by the Borrower, as such agreements may be
amended or otherwise modified from time to time (collectively, the
"Assigned Agreements"), including without limitation, (i) all rights
-------------------
of the Borrower to receive moneys due and to become due under or
pursuant to the Assigned Agreements, (ii) all rights of the Borrower
to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the Assigned Agreements, (iii) claims of the Borrower
for damages arising out of or for breach of or default under the
Assigned Agreements, and (iv) the right of the Borrower to terminate
the Assigned Agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder;
(e) All other general intangibles;
(f) All instruments, documents, chattel paper, securities, policies and
certificates of insurance, deposits, cash or other goods;
(g) All federal, state and local tax refunds and claims of the Borrower,
all rights in litigation of the Borrower presently or hereafter
pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments of the Borrower now or hereafter arising
therefrom;
(h) All books, records, files, computer software and other similar
writings or evidence of the Borrower's business, including, without
limitation, written applications, credit information, account cards,
payment records, correspondence, delivery and installation
certificates, invoice copies, delivery receipts, notes and other
evidences of indebtedness, insurance certificates and the like,
together with all books of account, ledgers and cabinets in which the
same are reflected or maintained (including computer records, tapes,
software and the like), all whether now existing or hereafter arising;
3
<PAGE>
(i) All other personal property of any kind or type whatsoever owned by
the Borrower;
(j) All accessions and additions to, and substitutions and replacements
of, any and all of the foregoing, whether now existing or hereafter
arising; and
(k) All proceeds and products of the foregoing and all insurance relating
to the foregoing Collateral and all proceeds thereof (including,
without limitation, insurance proceeds payable on account of business
interruption), whether now existing or hereafter arising.
Without limiting the generality of the foregoing but subject to the last
paragraph of this Section 2, the Collateral specifically shall include the
Project and all assets related to the Project, including, without limitation,
the fiber optic transmission system described on Schedule 1.01(c) to the Loan
Agreement, all electronic and other equipment associated with such system
(including, without limitation, all personal property, furniture and fixtures),
the Project Contracts described on Schedule C attached hereto (as such contracts
--------
may be amended or modified from time to time), and other agreements pertaining
to the Project (including, without limitation, all rights of the Borrower to
receive the payment of money under such agreements).
Notwithstanding the foregoing, "Collateral" (i) shall not include any
contract described on Schedule C-1 attached hereto or any rights under any such
-------------
contract; (ii) until such time as any required third-party consents have been
obtained, shall not include any contract or agreement described in item 6 on
Schedule C or any other contract or agreement not listed on Schedule C if an
- ---------- ----------
assignment of; or grant of a security interest in or lien on, such contract or
agreement is prohibited by the terms of such contract or agreement or requires a
third-party consent or notice for any such assignment to be effective; and (iii)
in the case of the contract described in item I of Schedule C shall be limited
----------
to the Borrower's rights to receive the payment of money under such contract.
3. General Representations, Warranties, Covenants and Agreements. So long
-------------------------------------------------------------
as any Secured Obligations or any obligation to extend any such Secured
Obligations remains outstanding, the Borrower hereby represents and warrants
to, and covenants and agrees with, the Agent that:
(a) Chief Executive Office. The Borrower's chief executive office
----------------------
and chief place of business are as shown on Schedule A. The Borrower has no
----------
chief executive offices or chief places of business other than as shown on
Schedule A and will not move or otherwise change its chief executive office
----------
or chief place of business at a location other than as shown on Schedule A
----------
without providing the Agent with at least 30 days' prior written notice.
(b) Books and Records. The books and records of the Borrower
-----------------
relating to the Collateral (including ledger sheets, correspondence and
invoice documents and instruments relating to or evidencing the Collateral)
are, and will at all times be kept, at
4
<PAGE>
the Borrower's chief executive office unless otherwise indicated on Schedule A.
----------
The Borrower will keep the books and records relating to the Collateral current
and in good order and will take reasonable steps to safeguard them (including
making and storing copies thereof where appropriate).
(c) Legal Name and Trade Names. The Borrower represents and warrants that
--------------------------
(A) its correct legal name is as shown in this Agreement, (B) it has not in the
four months immediately preceding the date of this Agreement changed its name,
been a party to a merger, consolidation or other change in structure and (C)
except as shown on Schedule B, it does not use, and has not at any time in the
----------
four months immediately preceding the date of this Agreement used, any trade
names in the invoicing of receivables or otherwise in the conduct of its
business. The Borrower further covenants and agrees that it will not change its
legal name, be a party to a merger, consolidation or other change in structure
or use a trade name in its business without first giving the Agent at least 30
days' prior written notice.
(d) Priority. The Collateral and every part thereof is and will be free
--------
and clear of all security interests, liens (including without limitation
mechanics, laborers and statutory liens), attachments, levies, encumbrances of
every kind, nature and description and whether voluntary or involuntary, and
licenses for the use thereof except for liens, encumbrances and licenses
permitted under the Loan Agreement (collectively the "Permitted Liens"). The
---------------
Borrower will warrant and defend the Collateral against any claims and demands
(other than the Permitted Liens) of all persons at any time claiming the same or
any interest in the Collateral adverse to the Agent. The Borrower further
represents, warrants, covenants and agrees that the security interest in the
Collateral granted to the Agent hereunder (i) when properly perfected by filing,
shall constitute a valid and perfected security interest in the Collateral and
(ii) other than the Permitted Liens, is not subject to, and that the Borrower
will not grant or permit to exist, any other security interests, liens,
encumbrances or claims (including without limitation claims of the United States
of America or any department, agency or instrumentality thereof; or any state,
county or local governmental agency) on or against the Collateral, whether
senior, superior, junior, subordinate or equal to the security interest granted
to the Agent hereby, or otherwise.
(e) Inspection. The Borrower will, upon reasonable notice, at all times
----------
allow the Agent or its representatives free access to and right of inspection of
the Collateral and the books and records relating thereto and shall otherwise
cooperate with and promptly respond to the reasonable requests of the Agent or
its representatives with respect thereto; provided, however, that prior to any
Default hereunder, any such access or inspection shall only be allowed during
the Borrower's normal business hours. As to any premises not owned by the
Borrower wherein any of the Collateral is located the Borrower shall use its
best efforts to cause each owner of such premises to enter into an agreement
waiving any lien such owner may have by contract or under law with respect to
such Collateral, and allowing the inspection and removal of such Collateral by
the Agent and otherwise, in form and substance satisfactory to the Agent.
5
<PAGE>
(f) Perfection of Security Interest. The Borrower represents that this
-------------------------------
Agreement creates a valid security interest in the Collateral securing payment
and performance of the Secured Obligations and that all filings and other action
necessary to perfect such security interest have been taken or shall be promptly
taken. The Borrower agrees to execute and deliver to the Agent such further
agreements and assignments or other instruments (including affidavits, notices,
reaffirmations and amendments and restatements of existing documents, as the
Agent may reasonably request) and to do all such other things as the Agent may
reasonably deem necessary or appropriate to assure to the Agent its security
interest hereunder, including such financing statements (including renewal
statements), statements or amendments thereof or supplements thereto or other
instruments as the Agent may from time to time reasonably request in order to
perfect and maintain the security interest granted hereunder in accordance with
the Uniform Commercial Code as enacted in the State of North Carolina on the
date hereof and any successor statute(s) thereto (the "Code") to consummate the
----
transactions contemplated hereby and to otherwise protect and assure the Agent
of its rights and interests hereunder. To that end, Borrower agrees that the
Agent may file one or more financing statements disclosing its security interest
in any or all of the Collateral without the Borrower's signature thereon, and
further the Borrower also hereby irrevocably makes, constitutes and appoints the
Agent, its nominee or any other person whom the Agent may designate, as the
Borrower's attorney in fact with full power to sign in the name of the Borrower
any such financing statements, or amendments and supplements to financing
statements, renewal financing statements, notices or any similar documents which
in the Agent's reasonable discretion would be necessary, appropriate or
convenient in order to perfect and maintain perfection of the security interests
granted hereunder, such power, being coupled with an interest, being and
remaining irrevocable so long as any of the Secured Obligations and any
commitments relating thereto remain outstanding. The Borrower hereby agrees that
a carbon, photographic or other reproduction of this Agreement or any such
financing statement is sufficient for filing as a financing statement by the
Agent without notice thereof to the Borrower wherever the Agent may in its sole
discretion desire to file the same. In the event for any reason the law of any
jurisdiction other than North Carolina becomes or is applicable to the
Collateral or any part thereof; or to any of the Secured Obligations, the
Borrower agrees to execute and deliver all such instruments and to do all such
other things as the Agent in its sole discretion reasonably deems necessary or
appropriate to preserve, protect and enforce the security interest of the Agent
under the law of such other jurisdiction (and, if the Borrower shall fail to do
so promptly upon the request of the Agent, then the Agent may execute any and
all such requested documents on behalf of the Borrower pursuant to the power of
attorney granted hereinabove). If any Collateral is in the possession or control
of any of the Borrower's agents and the Agent so requests, the Borrower agrees
to notify such agents in writing of the Agent's security interest therein and,
upon the Agent's request, instruct them to hold all such Collateral for the
Agent's account and subject to the Agent's instructions. The Borrower agrees,
upon request, to mark its books and records to reflect the security interest of
the Agent in the Collateral.
6
<PAGE>
(g) Advances by Agent. On failure of the Borrower to perform any of the
-----------------
covenants and agreements herein contained, the Agent may, at its option, perform
the same and in so doing may expend such sums as the Agent may reasonably deem
advisable in the performance thereof, including without limitation the payment
of any insurance premiums, the payment of any taxes, liens and encumbrances,
expenditures made in defending against any adverse claim and all other
expenditures which the Agent may be compelled to make by operation of law or
which the Agent may make by agreement or otherwise for the protection of the
security hereof. All such sums and amounts so expended shall be repayable by the
Borrower immediately without notice or demand, shall constitute so much
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the rate per annum provided in Section 2.04 of the Loan
Agreement (such rate per annum as so determined being hereinafter referred to as
the "Default Rate"). No such performance of any covenant or agreement by the
------------
Agent on behalf of the Borrower, and no such advance or expenditure therefor,
shall relieve the Borrower of any default under the terms of this Agreement. The
Agent, in making any payment hereby authorized may do so according to any bill,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien or title or claim. The Agent, in performing any act
hereunder, shall be the judge in its reasonable discretion of whether the
Borrower is required to perform the same under the terms of this Agreement. The
Agent is authorized to charge any depository account of the Borrower maintained
with the Agent, for the amount of such sums and amounts so expended by such
party. The Agent will provide notice and an opportunity to cure to the Borrower
prior to exercise of rights under this subparagraph (g), but only where such
notice and opportunity would not adversely affect the Collateral or the Agent's
rights therein.
(h) Payment of Taxes and Charges. The Borrower will pay promptly when due
----------------------------
all taxes, assessments, and governmental charges and levies upon or against the
Collateral in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith by appropriate proceedings. In the event the Borrower shall fail to
pay any such amounts and the failure to pay would or might result in a lien on
or claim against any of the Collateral, the Agent may, but shall have no
obligation to, make payment of such amounts or otherwise compromise, settle or
obtain a release of such liens or potential liens and any such amounts disbursed
by the Agent on account thereof shall become part of the Secured Obligations
hereunder, payable on demand.
(i) Preservation of the Collateral. The Borrower will not waste or
------------------------------
destroy the Collateral or any part thereof and will not be negligent in the care
and use of any Collateral, reasonable wear and tear excepted.
(j) Disposition. Without the prior written consent of the Agent, the
-----------
Borrower will not sell or otherwise dispose of any portion of; or rights or
interests in, the Collateral except as expressly permitted in the Loan
Documents.
7
<PAGE>
(k) Compliance with Laws and Agreements. The Borrower will comply with
-----------------------------------
the terms and conditions of any contracts, licenses, leases, easements, right-
of-way agreements or other agreements binding upon the Borrower or affecting the
Collateral and any orders, ordinances, laws or statutes of any city, state or
other governmental entity, department or agency having jurisdiction with respect
to any premises on which Collateral may be located or the conduct of business
thereon.
4. Events of Default. The following shall constitute "Events of Default"
----------------- -----------------
hereunder:
(a) Nonpayment. Failure by the Borrower to make payment when due of any
----------
Secured Obligations or amounts in respect of Secured Obligations (including for
example, any mandatory prepayments or required cash collateral), after giving
effect to any applicable cure periods set forth in the Loan Agreement.
(b) Misrepresentation. Any representation or warranty made by the
-----------------
Borrower herein, or in any statement or certificate furnished to the Agent
pursuant hereto, or in connection herewith, shall be false, in any material
respect, as of the date on which made or issued.
(c) Noncompliance. Failure by the Borrower to comply with any of the
-------------
terms and conditions of this Security Agreement within thirty (30) days after
Borrower receives notice from Agent that Borrower is not in compliance with any
of the terms and conditions of this Security Agreement.
(d) Cross-Default. The occurrence of an event of default under the Loan
-------------
Agreement or any of the other Loan Documents.
5. Remedies.
--------
(a) General Remedies. Upon the occurrence of an Event of Default and at
----------------
any time thereafter, the Agent shall have in addition to the rights and remedies
provided herein, in the Loan Documents or at law or in equity, the rights and
remedies of a secured party under the Code (regardless of whether the Code is
the law of the jurisdiction where the rights and remedies are asserted and
regardless of whether the Code applies to the affected Collateral), and further
the Agent may with or without judicial process or the aid and assistance of
others (i) enter on any premises on which any of the Collateral may be located
and, without resistance or interference by the Borrower, take possession of the
Collateral, (ii) dispose of any Collateral on any such premises, (iii) require
the Borrower to assemble and make available to the Agent at the Borrower's own
expense any Collateral at any place and time designated by the Agent which is
reasonably convenient to both parties, (iv) remove any Collateral from any such
premises for the purpose of effecting sale or other disposition thereof; and/or
(v) without demand and without advertisement, notice, hearing or process of law,
all of which the Borrower hereby waives to the extent permitted by law, at any
place and time or times, sell and deliver any or all
8
<PAGE>
Collateral held by or for it at public or private sale, by one or more
contracts, in one or more parcels, for cash, upon credit or otherwise, at such
prices and upon such terms as the Agent deems advisable, in its sole discretion,
provided that said disposition complies with any and all mandatory legal
requirements. In addition to all other sums due the Agent, the Borrower shall
pay the Agent all reasonable costs and expenses incurred by the Agent, including
reasonable attorneys' fees and court costs, in obtaining or liquidating the
Collateral, in enforcing payment of Secured Obligations, or in the prosecution
or defense of any action or proceeding by or against the Agent or the Borrower
concerning any matter arising out of or connected with this Agreement or the
Collateral or Secured Obligations, including without limitation any of the
foregoing arising in, arising under or related to a case under the United States
Bankruptcy Code. To the extent the rights of notice cannot be legally waived
hereunder, the Borrower agrees that any requirement of reasonable notice shall
be met if such notice is personally served on or mailed, postage prepaid, to the
Borrower in accordance with Section 10 hereof at least 10 days before the time
of sale or other event giving rise to the requirement of such notice. The Agent
shall not be obligated to make any sale or other disposition of the Collateral
regardless of notice having been given. To the extent permitted by law, the
Agent or any Lender may be the purchaser at any such sale. To the extent
permitted by applicable law, the Borrower hereby waives all of its rights of
redemption from any such sale. Subject to the provisions of applicable law, the
Agent may postpone or cause the postponement of the sale of all or any portion
of the Collateral by announcement at the time and place of such sale, and such
sale may, without further notice, to the extent permitted by law, be made at the
time and place to which the sale was postponed or the Agent may further postpone
such sale by announcement made at such time and place.
(b) Access. In addition to the rights and remedies hereunder, upon the
------
occurrence of an Event of Default and during the continuance thereof; the Agent
shall have the right to enter and remain upon the various premises of the
Borrower without cost or charge to the Agent, and use the same, together with
materials, supplies, books and records of the Borrower for the purpose of
collecting and liquidating the Collateral, or for preparing for sale and
conducting the sale of the Collateral, whether by foreclosure, auction or
otherwise. In addition, the Agent may remove the Collateral, or any part
thereof, from such premises and/or any records with respect thereto, in order to
effectively collect or liquidate the Collateral. Further, upon the occurrence
and during the continuance of an Event of Default and upon request of the Agent,
the Borrower will assemble the Collateral, or such portion as the Agent may
request, and make it available to the Agent at a place and time as designated by
the Agent which is reasonably convenient to both parties.
(c) Waiver; Liability; Nonexclusive Nature of Remedies. Failure by the
--------------------------------------------------
Agent to exercise any right, remedy or option under this Agreement or any other
agreement between the Borrower and the Agent or provided by law, or delay by the
Agent in exercising the same, shall not operate as a waiver; no waiver hereunder
shall be effective unless it is in writing, signed by the party against whom
such waiver is sought to be enforced and then only to the extent specifically
stated, which in the case of the Agent
9
<PAGE>
shall only be granted as provided in Section 11 hereof. To the extent permitted
by law, neither the Agent, nor any party acting as attorney for the Agent, shall
be liable hereunder for any acts or omissions or for any error of judgment or
mistake of fact or law other than their gross negligence, willful misconduct or
unlawful conduct hereunder. The Agent shall have the right, in its sole
discretion, to determine which rights, security, liens, security interests or
remedies the Agent shall at any time pursue, relinquish, subordinate, modify or
take any other action with respect thereto, without in any way modifying or
affecting any of them or any of the Agent's rights or the Secured Obligations
under this Agreement or under any other of the Loan Documents. The rights and
remedies of the Agent under this Agreement shall be cumulative and not exclusive
of any other right or remedy which the Agent may have.
6. Rights of the Agent.
-------------------
(a) Power of Attorney. In addition to other powers of attorney contained
-----------------
herein, the Borrower hereby designates and appoints the Agent, on behalf of the
Lenders, and each of its designees or agents, as attorney-in-fact of the
Borrower, irrevocably and with power of substitution, with authority to take any
or all of the following actions upon the occurrence and during the continuance
of an Event of Default:
(i) to demand, collect, settle, compromise, adjust, give discharges
and releases, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any Collateral and enforcing any other right in
respect thereof;
(iii) to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Agent may deem
reasonably appropriate;
(iv) receive, open and dispose of mail addressed to the Borrower and
endorse checks, notes, drafts, acceptances, money orders, bills of lading,
warehouse receipts or other instruments or documents evidencing payment,
shipment or storage of the goods giving rise to the Collateral of the
Borrower on behalf of and in the name of the Borrower, or securing, or
relating to such Collateral;
(v) sell, assign, transfer, make any agreement in respect of, or
otherwise deal with or exercise rights in respect of, any Collateral or the
goods or services which have given rise thereto, as fully and completely as
though the Agent were the absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance policy relating
thereto;
10
<PAGE>
(vii) execute and deliver all assignments, conveyances, statements,
financing statements, renewal financing statements, security agreements,
affidavits, notices and other agreements, instruments and documents that
the Agent may determine necessary in order to perfect and maintain the
security interests and liens granted in this Security Agreement and in
order to fully consummate all of the transactions contemplated therein;
(viii) institute any foreclosure proceedings that the Agent may deem
appropriate; and
(ix) do and perform all such other acts and things as the Agent may
reasonably deem to be necessary, proper or convenient in connection with
the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Secured Obligations remain outstanding or
any Loan Document is in effect. The Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and options
expressly or implicitly granted to the Agent in this Security Agreement, and
shall not be liable for any failure to do so or any delay in doing so. The Agent
shall not be liable for any act or omission or for any error of judgment or any
mistake of fact or law in its individual capacity or its capacity as attorney-
in-fact except acts or omissions resulting from its gross negligence or willful
misconduct and except as provided in Section 6(c) hereof. This power of attorney
is conferred on the Agent solely to protect, preserve and realize upon its
security interest in the Collateral.
(b) Assignment by the Agent. The Agent may from time to time assign the
-----------------------
Secured Obligations and any portion thereof and/or the Collateral and any
portion thereof, and the assignee shall be entitled to all of the rights and
remedies of the Agent under this Security Agreement in relation thereto.
(c) The Agent's Duty of Care. Other than the exercise of reasonable care
------------------------
to assure the safe custody of the Collateral while being held by the Agent
hereunder, the Agent shall have no duty or liability to preserve rights
pertaining thereto, it being understood and agreed that the Borrower shall be
responsible for preservation of all rights in the Collateral, and the Agent
shall be relieved of all responsibility for the Collateral upon surrendering it
or tendering the surrender of it to the Borrower. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Agent accords its own property, which shall be no less than the
treatment employed by a reasonable and prudent agent in the industry, it being
understood that the Agent shall not have responsibility for taking any necessary
steps to preserve rights against any parties with respect to any of the
Collateral.
11
<PAGE>
7. Application of Proceeds. Upon the occurrence, and during the
-----------------------
continuance, of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent in
cash or its equivalent, will be applied in reduction of the Secured Obligations
in such order and manner as the Agent may direct in its sole discretion, and the
Borrower irrevocably waives the right to direct the application of such payments
and proceeds and acknowledges and agrees that the Agent shall have the
continuing and exclusive right to apply and reapply any and all such payments
and proceeds in the Agent's sole discretion, notwithstanding any entry to the
contrary upon any of its books and records. The Borrower shall remain liable to
the Agent for any deficiency. Any surplus remaining after the full payment and
satisfaction of the Secured Obligations shall be returned to the Borrower or to
whomsoever a court of competent jurisdiction shall determine to be entitled
thereto.
8. Costs of Counsel. If at any time hereafter, whether upon the
----------------
occurrence of a Default or Event of Default or not, the Agent in good faith
employs counsel to prepare or consider amendments, waivers or consents with
respect to this Agreement, or to take action or make a response in or with
respect to any legal or arbitral proceeding relating to this Agreement or
relating to the Collateral, or to protect the Collateral or exercise any rights
or remedies under this Agreement or with respect to the Collateral, then the
Borrower agrees to promptly pay upon demand any and all such reasonable costs
and expenses of the Agent, all of which costs and expenses shall constitute
Secured Obligations hereunder.
9. Continuing Agreement. This Agreement shall be a continuing agreement
--------------------
in every respect and shall remain in full force and effect until all of the
Secured Obligations have been fully paid and satisfied and any commitments
thereunder or with regard thereto shall have terminated. Upon such termination
of this Agreement, the Agent shall, upon the request and at the expense of the
Borrower, forthwith release all of its liens and security interests hereunder.
Notwithstanding the foregoing, all releases and indemnities provided hereunder
shall survive termination of this Agreement.
10. Notices. Except as otherwise expressly provided herein, all notices
-------
and other communications shall have been duly given and shall be effective (i)
when delivered, (ii) when transmitted via telecopy (or other facsimile device)
to the number set out below, (iii) the day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier service
with arrangements made for overnight delivery, or (iv) the third Business Day
following the day on which the same is sent by certified or registered mail,
postage prepaid, in each case to the respective parties at the address set forth
below or at such other address as such party may specify by written notice to
the other parties hereto:
12
<PAGE>
if to the Borrower: Mr. Douglas A. Shumate
Vice President and
Chief Financial Officer
Gulf States Transmission
Systems, Inc.
910 First Avenue
West Point, Georgia 31833
Telephone: (706) 645-8189
Telecopy: (706) 645-8989
if to the Agent: NationsBank, N.A., as Agent
Agency Services
NC1-001-15-04
101 North Tryon Street, 15th Floor
Charlotte, North Carolina 28255
Attn: Marie Garcelon
Telephone: (704) 388-3918
Telecopy: (704) 386-8694
with a copy to: NationsBank of Texas, N.A.
Communications Finance Group
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn: Doug Stuart
Telephone: (214) 508-0922
Telecopy: (214) 508-9390
11. Amendments; Waivers; Modifications. This Agreement and the provisions
----------------------------------
hereof may not be amended, waived, modified, changed, discharged or terminated
except with the prior written consent of both the Borrower and the Agent.
12. Successors in Interest. This Agreement shall create a continuing
----------------------
security interest in the Collateral and shall be binding upon the Borrower, its
successors and assigns and shall inure, together with the rights and remedies of
the Agent hereunder, to the benefit of the Agent and its successors and assigns;
provided, however, that the Borrower may not assign its rights or delegate its
duties hereunder without the Agent's prior written consent. To the extent
permitted by law, the Borrower hereby releases the Agent, and its successors and
assigns, from any liability for any act or omission relating to this Agreement
or the Collateral, except for any liability arising from the Agent's gross
negligence or willful misconduct and except as provided in Section 6(c) hereof.
13. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
13
<PAGE>
14. Headings. The headings of the sections and subsections hereof are
--------
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
15. Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NORTH CAROLINA. Any legal action or proceeding with respect to this
Agreement or any other Loan Document may be brought in the courts of the
State of North Carolina in Mecklenburg County, or of the United States for
the Western District of North Carolina, and, by execution and delivery of
this Agreement, the Borrower hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
such courts. The Borrower further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Borrower at its address for notice listed in
Section 10 hereof, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of the Agent to serve
process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against the Borrower in any other
jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
or any other Loan Document brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not to plead or
claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
(c) THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
16. Severability. If any provision of any of this Agreement is determined
------------
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
17. Entirety. This Agreement together with the other Loan Documents
--------
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and
14
<PAGE>
understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Loan Documents or the transactions contemplated
herein and therein.
18. Survival. All representations and warranties of the Borrower hereunder
--------
shall survive the execution and delivery of this Agreement and the other Loan
Documents.
19. Other Security. To the extent that any of the Secured Obligations are
--------------
now or hereafter secured by property other than the Collateral, or by a
guarantee, endorsement or property of any other person, then the Agent shall
have the right to proceed against such other property, guarantee or endorsement
upon the occurrence of any Event of Default.
20. Effectiveness. Notwithstanding anything herein to the contrary, the
-------------
terms and conditions of this Loan Agreement shall not become effective until the
Effective Date, and prior to such date the terms and conditions of the Prior
Security Agreement shall continue in full force and effect.
[Remainder of page intentionally left blank.]
15
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed under seal as of the date first above written.
GULF STATES TRANSMISSION
SYSTEMS, INC., a Delaware corporation
ATTEST:
By By: /s/ Douglas A. Shumate
------------------------ -----------------------------------
Secretary Douglas A. Shumate
------- Vice President and Chief
Financial Officer
(Corporate Seal)
Accepted and agreed to in Charlotte, North Carolina as of the date first
above written.
NATIONSBANK, N.A., as Agent
By:
-----------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed under seal as of the date first above written.
GULF STATES TRANSMISSION
SYSTEMS, INC., a Delaware corporation
ATTEST:
By By:
------------------------ -----------------------------------
Secretary Douglas A. Shumate
------- Vice President and Chief
Financial Officer
(Corporate Seal)
Accepted and agreed to in Charlotte, North Carolina as of the date first
above written.
NATIONSBANK, N.A., as Agent
By: /s/ Doug Stuart
-----------------------------------
Name: Doug Stuart
Title: Senior Vice President
<PAGE>
SCHEDULE A
----------
to
Amended and Restated
Security Agreement
dated as of March 27, 1997
by Gulf States Transmission Systems, Inc.
in favor of
NationsBank, N.A.
CHIEF EXECUTIVE OFFICE
AND CHIEF PLACE OF BUSINESS
---------------------------
Gulf States Transmission Systems, Inc.
910 First Avenue
West Point, Georgia 31833
Telephone: (706) 645-8189
Telecopy: (706) 645-8989
<PAGE>
SCHEDULE B
----------
to
Amended and Restated
Security Agreement
dated as of March 27, 1997
by Gulf States Transmission Systems, Inc.
in favor of NationsBank, N.A.
PERMITTED TRADE NAMES
---------------------
None
<PAGE>
SCHEDULE C
----------
to
Amended and Restated
Security Agreement
dated as of March 27, 1997
by Gulf States Transmission Systems, Inc.
in favor of NationsBank, N.A.
PROJECT CONTRACTS
-----------------
1. Telecommunications System Agreement dated January 26, 1995 between
Interstate FiberNet and Sprint Communications Company L.P., which was
assigned by Interstate FiberNet to Gulf States FiberNet pursuant to that
certain Assignment of Contract dated as of March 21, 1995 from Interstate
FiberNet to Gulf States FiberNet and that certain Assumption dated as of
March 21, 1995 by Gulf States FiberNet accepting such Assignment of
Contract, as the same may be amended or modified from time to time.
2. Operating Agreement dated as of August 11, 1994 between Gulf States
FiberNet and Illinois Central Railroad Company, as the same may be amended
or modified from time to time.
3. Term Agreement dated as of August 11, 1994 between Gulf States FiberNet and
Illinois Central Railroad Company, as the same may be amended or modified
from time to time.
4. Revised and Restated Fiber Optic Facilities and Services Agreement dated as
of June 9, 1995 by and between 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, as the same may be amended or
modified from time to time.
5. Operating Agreement dated as of August 17, 1994 by and between Gulf States
FiberNet and Kansas City Southern Railway Company, as the same may be
amended or modified from time to time.
6. All other contracts and agreements relating to the construction,
installation, reconstruction, operation, maintenance, repair of or
otherwise relating to the Project (as defined in the Loan Agreement
referred to in the Amended and Restated Security Agreement), but excluding
those contracts and agreements described on Schedule C-1.
------------
<PAGE>
SCHEDULE C-1
------------
to
Amended and Restated
Security Agreement
dated as of March 27, 1997
by Gulf States Transmission Systems, Inc.
in favor of NationsBank, N.A.
EXCLUDED PROJECT CONTRACTS
--------------------------
1. Telecommunications System Maintenance Agreement dated as of January 26,
1995 between Interstate FiberNet and Sprint Communications Company L.P.,
which was assigned by Interstate FiberNet to Gulf States FiberNet pursuant
to an Assignment dated as of July 25, 1996, as the same may be amended or
modified from time to time.
2. Sprint Communications Company Facilities and Services Agreement dated
January 26, 1995 between Sprint Communications Company L.P. and Interstate
FiberNet, which was assigned by Interstate FiberNet to Gulf States FiberNet
in accordance with an Assignment dated as of July 25, 1995, as the same may
be amended or modified from time to time.
3. Specifications for Maintenance of Fiber Regenerator Sites, which was
assigned by Interstate FiberNet to Gulf States FiberNet pursuant to an
Assignment dated as of March 21, 1995, setting forth Interstate FiberNet's
performance obligations regarding all regenerator sites along the fiber
cable route from Atlanta, Georgia, to Shreveport, Louisiana, as the same
may be amended or modified from time to time.
4. Agreement for Use and Non-Disclosure of Confidential Information dated as
of June 6, 1994 between MPX Systems, Inc. and Sprint Communications Company
L.P., as the same may be amended or modified from time to time.
5. Fiber Optic Facility Lease Agreement dated as of January 31, 1997 between
Southern Telecom I and Gulf States FiberNet (originally signed by
Interstate FiberNet and assigned effective the same day to Gulf States
FiberNet).
6. Fiber System Lease Agreement dated as of January 30, 1996 between CSW
Communications, Inc. and Gulf States FiberNet.
7. 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.).
8. The agreement relating to the Longview, Texas to Dallas, Texas spur of the
Project (as defined in the Loan Agreement referred to in the Amended and
Restated Security Agreement), if and when such agreement is executed.
<PAGE>
Exhibit 10.13
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment"), dated as of
----------
March 27, 1997, is by and between GULF STATES FIBERNET, a Georgia general
partnership, as assignor (the "Assignor"), and GULF STATES TRANSMISSION SYSTEMS,
--------
INC., a Delaware corporation, as assignee (the "Assignee").
--------
WHEREAS, the Assignor entered into that certain Loan Agreement dated as of
July 25, 1995 (as amended and modified, the "Loan Agreement") with the Lenders
--------------
party thereto and NationsBank, N.A. (formerly known as NationsBank, N.A.
(Carolinas)), as Agent for the Lenders (the "Agent"), and certain other Loan
-----
Documents (as defined in the Loan Agreement) in connection therewith as more
particularly described in Schedule I attached hereto (collectively, as amended
or modified, the "Assigned Agreements");
-------------------
WHEREAS, the Assignor has agreed to assign to the Assignee all of its
rights, interests, duties, obligations and liabilities in, to and under the
Assigned Agreements;
WHEREAS, the Assignee desires to accept the assignment of all of the
Assignor's rights, interests, duties, obligations and liabilities in, to and
under the Assigned Agreements; and
WHEREAS, immediately following the assignment and assumption of the
Assigned Agreements pursuant to this assignment, (i) ITC Holding Company, Inc.
shall acquire SCANA Communications, Inc.'s general partnership interest in the
Assignor (the "Partnership Interest") and shall transfer the Partnership
--------------------
Interest to the Assignee, and (ii) upon receipt of the Partnership Interest, the
Assignee shall hold all of the partnership interests in the Assignor and, by
operation of law, the Assignor shall be dissolved as a partnership and all of
the assets of the Assignor (the "FiberNet Assets"), including, without
---------------
limitation, the Project Contracts more particularly described in Schedule II
attached hereto (the "Project Contracts"), shall become assets of the Assignee;
-----------------
and
WHEREAS, the Assignee desires to acknowledge that upon such receipt it will
own such right, title and interest in and to the FiberNet Assets (including,
without limitation, the Project Contracts) as was owned by the Assignor
immediately prior to such receipt.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt of which are hereby acknowledged, the
parties hereto agree as follows:
1. Assignment of Assigned Agreements. The Assignor hereby assigns,
---------------------------------
transfers and conveys to the Assignee all of its rights, interests, duties,
obligations and liabilities in, to and under the Assigned Agreements.
2. Assumption of Assigned Agreements. The Assignee hereby accepts the
---------------------------------
assignment contained in Section 1 and assumes all of the duties, obligations and
liabilities of the Assignor in, to and under the Assigned Agreements to the same
extent as if the Assignee had executed the Assigned Agreements. The Assignee
hereby agrees to be bound by the terms and
<PAGE>
provisions of the Assigned Agreements and accepts all of the Assignor's rights,
interests, duties, obligations and liabilities thereunder.
3. Agreement to be Bound by Project Contracts. Immediately following the
------------------------------------------
assignment and assumption of the Assigned Agreements pursuant to Sections 1 and
2 above, respectively, and effective upon receipt from ITC Holding Company, Inc.
of the Partnership Interest, the Assignee acknowledges that the Assignor shall
have been dissolved by operation of law and the Assignee shall own such right,
title and interest in and to the FiberNet Assets (including, without limitation,
the Project Contracts) as was owned by the Assignor immediately prior to such
receipt. The Assignee hereby agrees to be bound by the terms and provisions of
the Project Contracts and accepts all of the Assignor's rights, interests,
duties, obligations and liabilities thereunder.
4. No Modifications. Nothing contained in this Assignment shall amend or
----------------
modify, or be deemed to amend or modify, the Assignment Agreements.
5. Governing Law. This Assignment shall in all respects be governed by,
-------------
and construed in accordance with, the internal substantive laws of the State of
North Carolina, including all matters of construction, validity or
interpretation of this Assignment.
6. Counterparts. This Assignment may be executed in several counterparts,
------------
each of which shall be deemed an original, and all such counterparts shall
constitute one and the same instrument.
7. Binding Nature. This Assignment shall be binding upon and inure to the
--------------
benefit of the parties hereto and their successors and assigns.
[The remainder of this page has been intentionally left blank]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties herto have duly executed this Assignment as
of the date set forth above.
ASSIGNOR: GULF STATES FIBERNET,
a Georgia general partnership
By:/s/ Douglas A. Shumate
------------------------------
Name: Douglas A. Shumate
----------------------------
Title: VP/CEO Managing Ptr.
---------------------------
ASSIGNEE: GULF STATES TRANSMISSION SYSTEMS,
INC., a Delaware corporation
By:/s/ Douglas A. Shumate
------------------------------
Name: Douglas A. Shumate
----------------------------
Title: VP/CEO Managing Ptr.
---------------------------
Acknowledged and Agreed to:
NATIONSBANK,N.A., as Agent
By:
-----------------------
Name:
---------------------
Title:
--------------------
<PAGE>
In WITNESS WHEREOF, the parties hereto have duly executed this Assignment
as of the date set forth above.
ASSIGNOR: GULF STATES FIBERNET,
a Georgia general partnership
By:_______________________________
Name:_____________________________
Title:____________________________
ASSIGNEE: GULF STATES TRANSMISSION SYSTEMS,
INC., A Delaware corporation
By:_______________________________
Name:_____________________________
Title:____________________________
Acknowledged and Agreed to:
NATIONSBANK,N.A., as Agent
By:/s/ Doug Stuart
---------------------------
Name: Doug Stuart
-------------------------
Title: SVP
------------------------
<PAGE>
Schedule I
to
Assignment and Assumption Agreement
Description of Assigned Agreements
----------------------------------
1. Loan Agreement dated as of July 25, 1995 among Gulf States FiberNet, the
Lenders party thereto and NationsBank, N.A. (formerly known as NationsBank, N.A.
(Carolinas)), as Agent for the Lenders, as amended by that certain First
Amendment to Loan Agreement dated as of December 29, 1995, that certain Second
Amendment to Loan Agreement dated as of March 29, 1996 and that certain Third
Amendment to Loan Documents dated as of September 27, 1996.
2. Term Loan A Promissory Notes dated March 29, 1996 in the following amounts
and payable to the following payees:
(a) $15,657,894.74 Note payable to NationsBank, N.A.
(b) $13,421,052.63 Note payable to The Fuji Bank, Limited
3. Term Loan B Promissory Notes dated March 29, 1996 in the following principal
amounts and payable to the following payees:
(a) $1,842,105.26 Note payable to NationsBank, N.A.
(b) $1,578,947.37 Note payable to The Fuji Bank, Limited
4. Term Loan A Promissory Note dated December 21, 1995 in the principal amount
of $13,421,052.63 payable to MeesPierson N.V.
5. Term Loan B Promissory Note dated December 21, 1995 in the principal amount
of $1,578,947.37 payable to MeesPierson N.V.
6. Security Agreement dated as of July 25, 1995 between Gulf States FiberNet
and NationsBank, N.A. (formerly known as NationsBank, N.A. (Carolinas)), as
Agent for the Lenders, as amended by that certain Third Amendment to Loan
Documents dated as of September 27, 1996.
7. Those certain Assignments dated as of July 25, 1995 executed by Gulf States
FiberNet in connection with the Project Contracts (as defined in the Loan
Agreement referred to in item number 1 above) and naming NationsBank, N.A.
(formerly known as NationsBank, N.A. (Carolinas)), as Agent for the Lenders, as
assignee.
8. Those certain Consent and Agreements dated as of July 25, 1995 executed by
Gulf States FiberNet's counterparties in connection with the Specified Project
Contracts (as defined in the Loan Agreement referred to item number 1 above) and
acknowledging an assignment of a
<PAGE>
Specified Project Contract to NationsBank, N.A. (formerly known as NationsBank,
N.A. (Carolinas)), as Agent for the Lenders, as assignee.
9. ISDA Master Agreement, the Schedule and the Confirmation thereto, each
dated as of January 17, 1995, between Gulf States FiberNet and NationsBank, N.A.
(formerly known as NationsBank, N.A. (Carolinas)) relating to interest rate swap
transactions.
10. All other documents and agreements, if any, given by Assignor in connection
with the Loans (as defined in the Loan Agreement referred to in item number 1
above (the "Loan Agreement") or pursuant to the Loan Agreement.
Schedule I, Page 2
<PAGE>
Schedule II
to
Assignment and Assumption Agreement
Description of Project Contracts
--------------------------------
1. Telecommunications System Agreement dated January 26, 1995 between
Interstate FiberNet and Sprint Communications Company L.P., which was
assigned by Interstate FiberNet to Gulf States FiberNet pursuant to that
certain Assignment of Contract dated as of March 21, 1995 from Interstate
FiberNet to Gulf States FiberNet and that certain Assumption dated as of
March 21, 1995 by Gulf States FiberNet accepting such Assignment of
Contract, as the same may be amended or modified from time to time.
2. Telecommunications System Maintenance Agreement dated as of January 26,
1995 between Interstate FiberNet and Sprint Communications Company L.P.,
which was assigned by Interstate FiberNet to Gulf States FiberNet pursuant
to an Assignment dated as of July 25, 1996, as the same may be amended or
modified from time to time.
3. Sprint Communications Company Facilities and Services Agreement dated
January 26, 1995 between Sprint Communications Company L.P. and Interstate
FiberNet, which was assigned by Interstate FiberNet to Gulf States FiberNet
in accordance with an Assignment dated as of July 25, 1995, as the same may
be amended or modified from time to time.
4. Specifications for Maintenance of Fiber Regenerator Sites, which was
assigned by Interstate FiberNet to Gulf States FiberNet pursuant to an
Assignment dated as of March 21, 1995, setting forth Interstate FiberNet's
performance obligations regarding all regenerator sites along the fiber
cable route from Atlanta, Georgia, to Shreveport, Louisiana, as the same
may be amended or modified from time to time.
5. Agreement for Use and Non-Disclosure of Confidential Information dated as
of June 6, 1994 between MPX Systems, Inc. and Sprint Communications Company
L.P., as the same may be amended or modified from time to time.
6. Operating Agreement dated as of August 11, 1994 between Gulf States
FiberNet and Illinois Central Railroad Company, as the same may be amended
or modified from time to time.
7. Term Agreement dated as of August 11, 1994 between Gulf States FiberNet and
Illinois Central Railroad Company, as the same may be amended or modified
from time to time.
8. Revised and Restated Fiber Optic Facilities and Services Agreement dated as
of June 9, 1995 by and between Southern Development and Investment Group,
Inc., on behalf of itself and as agent for Alabama Power Company, Georgia
Power Company, Gulf Power
<PAGE>
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,
as the same may be amended or modified from time to time.
9. Operating Agreement dated as of August 17, 1994 by and between Gulf States
FiberNet and Kansas City Southern Railway Company, as the same may be
amended or modified from time to time.
10. Fiber Optic Facility Lease Agreement dated as of January 31, 1997 between
Southern Telecom 1 and Gulf States FiberNet (originally signed by
Interstate FiberNet and assigned effective the same day to Gulf States
FiberNet).
11. Fiber System Lease Agreement dated as of January 30, 1996 between CSW
Communications, Inc. and Gulf States FiberNet.
12. 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.).
13. The agreement relating to the Longview, Texas to Dallas, Texas spur of the
Project (as defined in the Loan Agreement referred to in Assignment and
Assumption Agreement), if and when such agreement is executed.
14. All other contracts and agreements relating to the construction,
installation, reconstruction, operation, maintenance, repair of or
otherwise relating to the Project (as defined in the Loan Agreement
referred to in the Assignment and Assumption Agreement).
Schedule II, Page 2
<PAGE>
Exhibit 10.14
TERM AGREEMENT
--------------
THIS AGREEMENT made as of this 11th day of August, 1994 by and between GULF
---- ------
STATES FIBRENET whose office address is 910 First Avenue, West Point, Georgia
31833 hereinafter referred to as "GSFN", and ILLINOIS CENTRAL RAILROAD COMPANY,
whose post office address is 17641 Ashland Avenue, Homewood, Illinois, 60430
hereinafter referred to as "RAILROAD".
W I T N E S S E T H
WHEREAS, RAILROAD owns the exclusive right to grant easements, leases or
licenses for the installation of fiber optic cable systems within certain real
property as shown in red on the rail system map attached hereto as Exhibit "A"
(hereinafter referred to as "Rail Corridor"); and
WHEREAS, GSFN wishes to acquire from RAILROAD an easement or easements, as
hereinafter described, defined and limited, in, on, upon, over, under, across,
along and through approximately 308 miles of Rail Corridor from Mile Post 0.0 in
Meridian, Mississippi, to Mile Post 140 in Vicksburg, Mississippi. From Mile
Post 0.0 in Delta Point, Louisiana to Mile Post 170.60 in Shreveport, Louisiana
(the mile posts are not necessarily indicative of the total mileage of any route
but only indicate the terminal points) to permit the construction, installation,
operation, maintenance, repair, reinstallation, replacement and removal therein
of the Fiber Optic Cable System as herein defined, and
WHEREAS, The Kansas City Southern Railway Company, hereinafter referred to
as "KCS" owns and operates a railroad over and across the Rail Corridor from
Meridian, Mississippi to Shreveport, Louisiana and Railroad owns and performs
operation over and across a portion of Rail Corridor in Jackson, Mississippi
from Mile Post 95.26 to Mile Post 96.15.
WHEREAS, GSFN and RAILROAD desire to enter into this Agreement to cover the
grant of easement, purchase price and closing process. All other terms shall be
part of separate agreements between GSFN and RAILROAD and GSFN and KCS.
NOW, THEREFORE, in consideration of the premises and in consideration of
the mutual covenants and agreements herein, the parties hereby expressly agree
as follows:
PURCHASE PRICE AND GRANT:
1. The Purchase Price for the grant set forth herein shall be TWO MILLION
FOUR HUNDRED AND SIXTY FIVE THOUSAND DOLLARS ($2,465,000.00). GSFN shall pay the
purchase price to RAILROAD as set forth in paragraph 2 hereof. Upon closing,
RAILROAD agrees to deliver to GSFN fully executed Easement Memoranda for each
county or parish Rail Corridor passes through, in form for recordation, granting
to GSFN the right of use and occupancy for (i) the construction, installation,
operation, maintenance, repair, reinstallation, replacement and removal of a
single Fiber Optic Cable System within the Rail Corridor and (ii) up to (10) ten
Repeater Sites, all pursuant to specifications acceptable to and at such
locations to be approved to by agreement and as subject to the terms and
conditions of that certain Agreement between RAILROAD and GSFN dated
_______, 1994, a copy of which is attached hereto and made a part hereof. The
Easement Memoranda
<PAGE>
shall be in the form of Exhibit "B" attached hereto and made a part hereof.
2. Payment of the Purchase Price shall be made to RAILROAD as follows:
(i) payment of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) upon execution of
the Agreement by GSFN.
(ii) payment of TWO MILLION FOUR HUNDRED FORTY FIVE THOUSAND DOLLARS
($2,440,000.00) by August 22, 1994.
Payment shall be by certified or cashiers check or by wire of immediately
available federal funds as determined by the RAILROAD. The date payment is made
shall be known as the "date of closing".
In the event GSFN fails to pay the Purchase Price as described above,
RAILROAD may, at its option and at its exclusive remedy, terminate this
Agreement and retain the $25,000.00 deposit as agreed liquidated damages.
3. RAILROAD shall deliver executed Easement Memoranda to GSFN as follows:
Upon payment of the sums set forth in paragraph 2(ii) hereof RAILROAD
shall deliver to GSFN executed Easement Memoranda for each county and
parish within Rail Corridor.
Installation of the Fiber Optic Cable system shall be permitted only upon
delivery of Easement Memoranda for the Rail Corridor. Failure of GSFN to make
payment of the full purchase price by August 22, 1994 shall cause all rights
granted to terminate immediately.
4. This Agreement and easement granted GSFN pursuant to this Agreement
and Operating Agreement shall have an initial term of thirty-one (31) years from
the date of the closing. GSFN, in its sole discretion and option may extend the
term from and after the date of closing for as many as two (2) additional terms
of ten (10) years each, such option to be exercised in each instance and written
notice thereof given to the RAILROAD at least twelve (12) months before
expiration of the then existing term of the Easement and this Agreement and
payment of the purchase price prior to the termination date of the preceding
term. The purchase price shall be determined by RAILROAD based on the lineal
miles of Rail Corridor then occupied by GSFN, RAILROAD shall notify GSFN, in
writing, no later than ninety (90) days subsequent receipt of GSFN's notice to
extend the term, of the purchase price acceptable to RAILROAD. If the purchase
price for the extended term exceeds the sum of $8,000.00 per mile set forth
herein for the initial term and is not acceptable to GSFN, it shall notify
RAILROAD within thirty (30) days and have an additional sixty (60) days after
its notice to secure and deliver to RAILROAD an independent appraisal report
indicating the fair market value of the easement as determined by a qualified
licensed right-of-way appraiser. If both parties cannot then agree on the
purchase price, they shall within thirty (30) days of GSFN's appraisal select a
mutually agreeable appraiser. The purchase price as determined by the mutually
agreeable appraiser shall then become the final purchase price and GSFN may
exercise its option at the value set forth by the appraiser, but in no event
shall the purchase price be less than the purchase price per mile sum set of
$8,000.00 for the initial Easement. The parties agree to share
2
<PAGE>
the cost of the mutually selected appraiser. For each of the appraisals provided
for above, the instruction to the appraiser(s) shall be to determine the fair
market value of a (10) year easement and subsequent ten (10) year easement for a
fiber optic cable emplacement, without reference to the value of GSFN's Fiber
Optic Cable System installed thereon, or to the revenues derived therefrom by
GSFN. Prior to the expiration of the full second renewal term, RAILROAD agrees
to execute such recordable Easement Memoranda may be required to grant to GSFN,
at no additional cost or price, in perpetuity all rights of usage and occupancy
of the Easement as are set forth in this Agreement and the Easement Operating
Agreement. No such grant will be made in the event GSFN has not renewed this
Agreement for the full term of both renewal periods or if this Agreement, or any
such term has been terminated for any reason prior to the completion of the
initial term and the two ten (10) year extensions as provided herein.
5. It is expressly understood RAILROAD does not warrant title to the premises
and GSFN accepts the grants of privileges contained herein subject to all lawful
outstanding existing liens, mortgages and superior rights in, and to said
premises, all leases, licenses and easements or other interests granted to
others, GSFN agrees it shall not have or make claim against RAILROAD for damage
on account of any deficiency in title to the Easement premises in the event of
failure or insufficiency of RAILROAD's title. RAILROAD does represent that it
has the right to grant the Easements described herein and that such grant does
not violate any easements or other agreements entered into by the RAILROAD.
6. The parties further agree to following:
(i) The provisions of Sections 30, 21, and 32 of the Operating Agreement
are incorporated herein by reference.
(ii) The Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of Mississippi.
(iii) Capitalized terms not otherwise defined herein shall have the
meanings provided in the Operating Agreement.
(iv) The Easements granted to GSFN by RAILROAD shall be non-exclusive and
RAILROAD, shall have the right to agree to other occupations of the
same easement by one or more other person(s), company(ies) or other
entity(ies); provided, however, that any holders of such subsequent
occupancies or agreements for such occupancies shall be subordinate
to prior easements and occupancies and subsequent users shall under
no circumstances be given the right to interfere with or cause the
relocation of the GSFN Facilities.
7. The right to renew the Easement as set forth herein shall apply to all of
the Fiber-Optic Cable System installed, and installation shall be subject to all
of terms and conditions set forth herein.
8. The terms and conditions of the grant, installation, maintenance, title,
operation and all other elements of the Fiber Optic Cable System and operation
shall be subject to the Operating Agreement between GSFN and the Operating
Agreement between GSFN and KCS, a copies of which is attached
3
<PAGE>
hereto and incorporated herein.
9. GSFN shall not disclose the terms of this Agreement to KCS without the prior
written consent of RAILROAD.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their
duly authorized offices in counterpart as of the day and year first written.
GULF STATES FIBRENET ILLINOIS CENTRAL RAILROAD COMPANY
By: /s/ Steven D. Moses By: /s/ [SIGNATURE ILLEGIBLE]
------------------------------- ---------------------------------------
TITLE: General Manager TITLE: PRESIDENT & CHIEF EXECUTIVE OFFICER
---------------------------- ------------------------------------
ATTEST:
By: By: /s/ D. A. Hills
------------------------------- --------------------------------------
TITLE: Provisions Coordinator TITLE: MANAGER INDUSTRIAL DEVELOPMENT
---------------------------- -----------------------------------
4
<PAGE>
Exhibit 10.15
REVISED AND RESTATED
FIBER OPTIC
FACILITIES AND SERVICES
AGREEMENT
BETWEEN
THE SOUTHERN ELECTRIC SYSTEM
AND
MPX SYSTEMS, INC.
DATED AS OF JUNE 9,1995
<PAGE>
Southern Electric System MPX Systems, Inc.
Revised and Restated Fiber Optic Facilities and Services Agreement
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Certain Definitions.................................................. 1
1.1 "Additional Capacity".......................................... 1
1.2 "Affiliate".................................................... 1
1.3 "Cable"........................................................ 1
1.4 "Capacity"..................................................... 2
1.5 "Completion Date".............................................. 2
1.6 "Confidential Information"..................................... 2
1.7 "Consultation"................................................. 2
1.8 "Dispute"...................................................... 2
1.9 "Dispute Committee"............................................ 2
1.10 "Electric Facility Upgrades"................................... 2
1.11 "Electronic Equipment"......................................... 2
1.12 "Equipment".................................................... 2
1.13 "Exclusive User"............................................... 2
1.14 "Force Majeure"................................................ 2
1.15 "GAAP"......................................................... 2
1.16 "Maximum Capacity"............................................. 3
1.17 "MPX Space".................................................... 3
1.18 "New Building"................................................. 3
1.19 "Power Equipment".............................................. 3
1.20 "Primary Capacity"............................................. 3
1.21 "Route Segment"................................................ 3
1.22 "Route Segment Exhibits"....................................... 3
1.23 "Scheduled Completion Date".................................... 3
1.24 "Scheduled Illumination Date".................................. 3
1.25 "SES Electric Facilities"...................................... 3
1.26 "SES Space".................................................... 3
1.27 "Specifications"............................................... 3
1.28 "Third Party Fibers"........................................... 3
2. Route Segments....................................................... 3
2.1 Existing Route Segments........................................ 3
2.2 SES Route Segments............................................. 3
2.3 MPX Route Segments............................................. 3
2.4 AT&T Route Segments............................................ 3
2.5 New Route Segments............................................. 3
2.6 Additional Route Segments...................................... 4
3. Fibers and Capacity.................................................. 4
</TABLE>
- --------------------------------------------------------------------------------
i
<PAGE>
Southern Electric System MPX Systems, Inc.
Revised and Restated Fiber Optic Facilities and Services Agreement
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
3.1 Generally...................................................... 4
3.2 WDM Windows on Shared Fibers................................... 4
3.3 SES Interest................................................... 4
3.3(a) SES Fibers................................................ 4
3.3(b) Title to Certain MPX Fibers and Shared Fibers............. 4
3.3(c) WDM Windows............................................... 4
3.3(d) SES Capacity.............................................. 4
3.3(e) Service Drops............................................. 4
3.4 MPX Interest................................................... 4
3.4(a) MPX Fibers and Shared Fibers.............................. 4
3.4(b) Limited MPX Fibers........................................ 4
3.4(c) WDM Windows............................................... 4
3.5 Conveyances of Primary and Additional Capacity................. 4
3.5(a) By MPX.................................................... 4
3.5(b) By SES.................................................... 4
3.6 Use of SES Interest by MPX..................................... 4
4. Use of Fibers and Capacity........................................... 5
4.1 By MPX......................................................... 5
4.1(a) MPX Fibers................................................ 5
4.1(b) Limited MPX Fibers........................................ 5
4.2 By SES......................................................... 5
4.2(a) During Term............................................... 5
4.2(b) Following Termination..................................... 5
4.3 Regulatory Approvals........................................... 5
5. Other Capacity to Be Provided to SES by MPX.......................... 5
6. Use of SES Electric Facilities....................................... 5
6.1 Availability of SES Electric Facilities........................ 5
6.2 Electric Facility Upgrades..................................... 6
6.3 Reimbursement of Cost.......................................... 6
7. Profit Sharing Payments.............................................. 6
7.1 Right to Payments.............................................. 6
7.2 Manner of Payment.............................................. 6
7.3 Rates.......................................................... 7
7.4 Treatment of Certain Revenues and Expenses..................... 7
7.5 Reports and Records............................................ 7
8. Title to Property; Taxes............................................. 7
8.1 Land and Rights in Land........................................ 7
8.2 Electric Facility Improvements................................. 7
</TABLE>
- --------------------------------------------------------------------------------
ii
<PAGE>
Southern Electric System MPX Systems, Inc.
Revised and Restated Fiber Optic Facilities and Services Agreement
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
8.3 Suspension Hardware............................................ 7
8.3(a) Installed on Overhead Electric Transmission Facilities.... 7
8.3(b) Installed on Rights-of-Way of Mississippi Power........... 8
8.3(c) Installed Elsewhere....................................... 8
8.4 Static Wire Portion of Cable................................... 8
8.5 Protective Sheathing........................................... 8
8.5(a) Installed on Rights-of-Way of Mississippi Power........... 8
8.5(b) Installed Elsewhere....................................... 8
8.6 MPX Fibers and Shared Fibers................................... 8
8.6(a) Installed on Rights-of-Way of Mississippi Power............ 8
8.6(b) Installed Elsewhere........................................ 8
8.7 SES Fibers..................................................... 8
8.8 Equipment...................................................... 8
8.8(a) Existing Equipment......................................... 8
8.8(b) Additional Equipment....................................... 8
8.8(b)(i) For Use with MPX Fibers and WDM Windows........... 8
8.8(b)(ii) For Use with SES Fibers and WDM Windows........... 8
8.9 Title to Facilities Physically Located on Rights-of-Way
of Mississippi Power......................................... 8
8.10 Transfers of Title Upon Termination of Agreement............... 9
8.11 Tax Ownership.................................................. 9
8.11(d) Tax Indemnification....................................... 9
8.11(e) Coordination.............................................. 10
8.12 Additional Documents........................................... 10
8.13 Security Interest and Subordination............................ 10
8.13(a) Covenant.................................................. 10
8.13(b) Collateral................................................ 10
8.13(c) Intercreditor and Subordination Agreement................. 10
8.13(d) Financing Statements...................................... 10
9. Performance of Work.................................................. 10
9.1 Standards and Procedures....................................... 10
9.2 Priority....................................................... 10
9.3 Approved Contractors........................................... 10
9.4 Right to Assume Responsibility................................. 11
9.5 Mandatory SES Work............................................. 11
10. Engineering and Design.............................................. 11
10.1 Cable.......................................................... 11
10.1(a) Party Responsible........................................ 11
10.1(b) Scope.................................................... 11
10.2 New Buildings.................................................. 11
10.2(a) Party Responsible........................................ 11
10.2(b) Scope.................................................... 11
</TABLE>
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10.3 Power Equipment................................................ 11
10.3(a) Party Responsible........................................ 11
10.3(b) Scope.................................................... 11
10.4 Electronic Equipment........................................... 11
10.4(a) Party Responsible........................................ 11
10.4(b) Scope.................................................... 12
10.5 Reimbursement of SES's Actual Cost............................. 12
11. Construction and Installation...................................... 12
11.1 Cable.......................................................... 12
11.1(a) Party Responsible........................................ 12
11.1(b) Scope.................................................... 12
11.2 Splicing....................................................... 12
11.2(a) Party Responsible........................................ 12
11.2(b) Scope.................................................... 12
11.3 New BuIldings.................................................. 12
11.3(a) Party Responsible........................................ 12
11.3(b) Scope.................................................... 12
11.4 Power Equipment................................................ 12
11.4(a) Party Responsible........................................ 12
11.4(b) Scope.................................................... 12
11.5 Electronic Equipment........................................... 12
11.5(a) Party Responsible........................................ 12
11.5(b) Scope.................................................... 12
11.6 Reimbursement of SES's Actual Cost............................. 12
12. Acquisition of Materials, Supplies and Equipment................... 12
12.1 Existing Equipment............................................. 13
12.2 Responsibility for Acquisition................................. 13
12.2(a) Cable.................................................... 13
12.2(b) New Buildings............................................ 13
12.2(c) Power Equipment.......................................... 13
12.2(d) Electric Equipment....................................... 13
12.3 Conformity to Design........................................... 13
12.4 Responsibility for Cost........................................ 13
12.4(a) Cable.................................................... 13
12.4(b) New Buildings............................................ 13
12.4(c) Equipment for Shared Fibers.............................. 13
12.4(d) Equipment for Other MPX Interest......................... 13
12.4(e) Certain Equipment for SES Interest....................... 13
12.4(f) Remaining Equipment for SES Interest..................... 13
13. Schedule........................................................... 13
</TABLE>
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13.1 Generally....................................................... 13
13.2 Completion...................................................... 13
14. Specifications; Testing............................................. 14
14.1 Conformity to Specifications.................................... 14
14.2 Responsibility for Testing...................................... 14
14.3 Test Equipment and Training Provided by MPX..................... 14
14.4 Reimbursement of Cost........................................... 14
15. Maintenance and Repair.............................................. 14
15.1 Cable........................................................... 14
15.1(a) Party Responsible......................................... 14
15.1(b) Scope..................................................... 14
15.2 New Buildings................................................... 14
15.2(a) Party Responsible......................................... 14
15.2(b) Scope..................................................... 14
15.3 Power Equipment................................................. 14
15.3(a) Party Responsible......................................... 14
15.3(b) Scope..................................................... 14
15.4 Electronic Equipment............................................ 14
15.4(a) Party Responsible......................................... 14
15.4(b) Scope..................................................... 14
15.5 Network Monitoring.............................................. 15
15.6 Reimbursement of SES's Actual Cost.............................. 15
15.7 Upgrades and Rebuilding......................................... 15
15.7(a) No Upgrades or Rebuilding of Buildings or Cable........... 15
15.7(b) Additions and Replacement of Equipment.................... 15
15.7(c) Redeployment of Equipment................................. 15
16. Restoration in the Event of Outages................................. 15
17. Alteration of Route................................................. 16
18. Approvals and Consultations......................................... 16
19. SES's Actual Costs; Billing and Verification........................ 16
20. Easements and Public Right-of-Way................................... 17
20.1 For Cable Installed on SES Electric Facilities.................. 17
20.2 For SES Interest Not Located on SES Electric Facilities......... 18
20.3 Street Franchises............................................... 18
20.4 Fees............................................................ 18
</TABLE>
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21. Term; Termination.................................................. 18
21.1 Original and Renewal Terms...................................... 18
21.2 Termination..................................................... 18
21.2(a) By Mutual Agreement....................................... 18
21.2(b) For Default............................................... 18
21.2(c) As Otherwise Provided..................................... 18
21.3 Rights Upon Termination......................................... 18
22. Default; Remedies................................................... 18
22.1 Events of Default............................................... 19
22.2 Limitation of Remedies.......................................... 19
22.3 Specific Performance............................................ 19
22.4 Remedies Cumulative............................................. 19
23. Insurance........................................................... 19
24. Casualty............................................................ 19
25. Indemnification and Limitation of Liability......................... 20
26. Access and Security................................................. 21
27. Confidentiality..................................................... 21
28. Other Activities of Parties......................................... 22
29. Dispute Resolution.................................................. 22
30. Conditions Precedent................................................ 22
31. Notices............................................................. 22
31.1 To SES.......................................................... 22
31.2 To MPX.......................................................... 22
32. Assignment; Right of First Offer/Refusal............................ 23
32.1 By SES.......................................................... 23
32.1(a) Prohibition of Assignment................................. 23
32.1(b) Right of First Negotiation................................ 23
32.2 By MPX.......................................................... 23
32.2(a) Prohibition of Assignment................................. 23
32.2(b) Right of First Offer...................................... 23
32.2(c) Right of First Refusal.................................... 24
32.2(d) Earnest Money............................................. 24
</TABLE>
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32.2(e) Closing................................................... 24
32.2(f) Transfer to Third Party................................... 24
32.3 Right to Permit Others to Use Interest Not Affected............. 25
32.4 Confidentiality................................................. 25
33. General............................................................. 25
33.1 Access to Records............................................... 25
33.2 Expenses........................................................ 25
33.3 Compliance with Laws............................................ 25
33.4 Force Majeure................................................... 25
33.5 Amendment....................................................... 25
33.6 Binding Effect; Limitation of Benefits.......................... 25
33.7 Severability.................................................... 25
33.8 Independent Contractors......................................... 25
33.9 Exercise of Right............................................... 25
33.10 Additional Actions and Documents................................ 25
33.11 Survival........................................................ 25
33.12 Entire Agreement................................................ 26
33.13 Headings........................................................ 26
33.14 Counterparts.................................................... 26
34. Completion of Exhibits............................................. 26
Exhibit A
Specifications........................................................... i
Exhibit B
Standards and Procedures................................................. i
Exhibit C
Mandatory SES Work....................................................... i
Exhibit D
Existing Route Segments.................................................. i
Exhibit E
SES Route Segments....................................................... i
Exhibit F
Non-SES Route Segments................................................... i
Exhibit G
AT&T Route Segments...................................................... i
</TABLE>
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Exhibit H
New Route Segments........................................................ i
Exhibit I
Existing Equipment........................................................ i
Exhibit J
Test Equipment and Training Provided by MPX............................... i
Exhibit K
Overhead Charges.......................................................... i
</TABLE>
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<PAGE>
REVISED AND RESTATED
FIBER OPTIC FACILITIES AND SERVICES
AGREEMENT
This REVISED AND RESTATED FIBER OPTIC FACILITIES AND SERVICES AGREEMENT (this
"Agreement") is entered into as of June 9, 1995 (the "Restatement Date") by and
between SOUTHERN DEVELOPMENT AND INVESTMENT GROUP, INC. ("Southern
Development"), a corporation organized and existing under the laws of the State
of Georgia and having its principal place of business at 64 Perimeter Center
East, Atlanta, GA 30346, on behalf of itself and as agent for Alabama Power
Company ("Alabama Power"), Georgia Power Company ("Georgia Power"), Gulf Power
Company ("Gulf Power"), Mississippi Power Company ("Mississippi Power"),
Savannah Electric and Power Company ("Savannah Electric"), Southern Electric
Generating Company ("SEGCO") and Southern Company Services, Inc. ("SCSI")
(Southern Development, Alabama Power, Georgia Power, Gulf Power, Mississippi
Power, Savannah Electric, SEGCO and SCSI being collectively referred to herein
as the "Southern Electric System" or "SES"), and MPX Systems, Inc., a
corporation organized and existing under the laws of the State of South Carolina
with offices at 440 Knox Abbott Drive, Suite 240, Cayce, SC 29033 ("MPX").
W i t n e s s e t h :
WHEREAS, MPX and SCSI, on behalf of itself and as agent for Georgia Power,
are parties to that certain Agreement for the Provision of Fiber Optic
Facilities and Services dated as of ___, 1986, as amended (the "Georgia
Agreement"), and MPX and SCSI, on behalf of itself and as agent for Alabama
Power and SEGCO, are parties to that certain Agreement for the Provision of
Fiber Optic Facilities and Services dated as of June 19, 1986, as amended (the
"Alabama Agreement"), pursuant to which SES has installed fiber optic cables in
the static wire as part of its electric transmission operations along certain of
its transmission lines and, in consideration of MPX having provided substantial
portions of the capital required for such installation of fiber optic cable and
other matters, has granted to MPX the exclusive right to use a significant
portion of the telecommunications capacity of such fiber optic cables;
WHEREAS, Alabama Power, Georgia Power, SEGCO and SCSI have assigned to
Southern Development certain of their rights under the Georgia Agreement and the
Alabama Agreement;
WHEREAS, Southern Development has been authorized by the Securities and
Exchange Commission pursuant to the Public Utility Holding Company Act of 1935
to acquire and operate on behalf of SES a prototype energy management
communications network; and
WHEREAS, the Parties hereto desire to consolidate and restate in a single
agreement the Georgia Agreement, as amended, and the Alabama Agreement, as
amended, to revise certain of the terms of such agreements, and to provide for
the installation of additional fiber optic cables on SES's electric transmission
and distribution lines, structures, poles, conduits and rights-of-way and for
other matters;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
and covenants hereinafter set forth, the Parties hereto, intending to be legally
bound, do hereby agree as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement and as used herein, the following capitalized
terms shall have the meanings indicated:
1.1 "Additional Capacity" -- The term "Additional Capacity" shall have
the meaning given to it in the Georgia Agreement and the Alabama Agreement. The
Additional Capacity shall cease to exist on the Restatement Date and be
functionally superseded by the MPX Interest.
1.2 "Affiliate" -- The term "Affiliate" shall mean:
1.2(a) any person or entity that directly or indirectly owns, controls or
holds with power to vote, five percent (5%) or more of the outstanding voting
securities of an entity;
1.2(b) any entity five percent (5%) of more of whose outstanding voting
securities are owned, controlled, or held with power to vote, directly or
indirectly, by a Party; or
1.2(c) any person who is an executive officer or director of an entity or
of any entity which is an Affiliate thereof under Clause 1.2(a);
provided, however, that no member of the Southern Electric System shall be
deemed to be an Affiliate of MPX for purposes of this Agreement.
1.3 "Cable" -- Fiber optic cable, including, without limitation,
associated suspension hardware, conduits, attachments, structures, and shelters,
previously installed pursuant to the Georgia Agreement and the Alabama Agreement
or to
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be installed pursuant to this Agreement on SES Electric Facilities and in other
locations as provided herein.
1.4 "Capacity" -- Telecommunications transmission capacity provided over
fiber optic facilities identified in this Agreement.
1.5 "Completion Date" -- With respect to any Route Segment, the date on
which MPX gives written notice to SES as provided in Subsection 13.2 to the
effect that MPX agrees that such Route Segment has been completed.
1.6 "Confidential Information" -- Information provided by one Party to
this Agreement to the other Party which is considered by the providing Party to
be confidential, proprietary information and which is specifically identified as
such in writing at or before the time it is provided to such other Party.
1.7 "Consultation" -- Whenever in this Agreement it is provided that one
Party will take action "in consultation with" the other Party, it is intended
that such consultation shall be thorough and meaningful, and that the view of
such other Party with regard to the matter under consultation shall be given the
weight appropriate to the experience and expertise of such Party in connection
with matters of the nature to which such consultation relates, but not
necessarily greater weight than the view of the acting Party.
1.8 "Dispute" -- Any controversy or claim between the Parties hereto
arising out of or relating to this Agreement or any breach thereof.
1.9 "Dispute Committee" -- A committee, consisting of one individual
designated by SES and one individual designated by MPX, to which any Dispute may
be submitted in an effort to resolve such Dispute.
1.10 "Electric Facility Upgrades" -- Improvements or upgrades to SES
Electric Facilities that are required to support the installation, presence and
maintenance of the Cable and any Equipment on or within such SES Electric
Facilities in accordance with SES's standard practices, procedures and
requirements applicable to SES Electric Facilities of the kind involved.
1.11 "Electronic Equipment" -- All electronic and optronic equipment,
including, without limitation, repeaters, terminals, junctions, alarm monitoring
equipment and all other necessary and related articles of Equipment (other than
Power Equipment) required in order to provide usable end-to-end Capacity over
any portion of the System.
1.12 "Equipment" -- Refers collectively to Power Equipment and Electronic
Equipment.
1.13 "Exclusive User" -- A person or entity with which MPX has a
direct contractual relationship permitting such person or entity the exclusive
use of all or substantially all of the MPX Fibers and the Capacity thereof on
any Route Segment OTHER THAN the 55 Park Place-Tap Route Segment, the Tap-
Hartwell Route Segment, and the 55 Park Place-Morrow Route Segment.
1.14 "Force Majeure" -- The occurrence or nonoccurrence of any act or
event that has, had or reasonably may be expected to have an adverse effect on
the rights or the obligations arising pursuant to this Agreement or an adverse
effect on the engineering, construction, installation, operation, maintenance or
management of all or any portion of the System, 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. Such acts or events include, but are not limited to,
the following:
1.14(a) Acts of God, landslides, sink holes, lightning, hurricanes,
earthquakes, fires, explosions, floods, acts of a public enemy, wars,
blockades, insurrections, riots or civil disturbances.
1.14(b) Labor disputes, strikes, work slowdowns, or work stoppages;
1.14(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;
1.14(d) The suspension, termination, interruption, denial, or failure of
renewal of any permit, license, consent, authorization, or approval necessary
to the engineering, design, construction, installation, operation,
maintenance or management of the System if such act or event is not the
result of wanton or willful action of the Party relying thereon;
1.14(e) 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;
1.14(f) The failure of any subcontractor or any supplier to furnish
labor, services, materials, or equipment in accordance with its contractual
obligations, provided such failure is itself due to an event of force majeure
or its adverse effect and the Party relying thereon cannot obtain substitute
performance within a reasonable time; or
1.14(g) A defect in manufactured equipment or manufactured components.
1.15 "GAAP" -- Generally accepted accounting principles consistently
applied.
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1.16 "Maximum Capacity" -- The maximum half- or full-duplex
telecommunications transmission capacity which may be implemented at any time
during the term of this Agreement using any given configuration of optical
fibers and commercially available electronic and optronic equipment. It is
hereby expressly recognized by the Parties that the telecommunications
transmission capacity available from any given configuration of optical fibers
is at present and for the foreseeable future will be increasing rapidly because
of technological advances, and the Parties expressly intend to incorporate in
this Definition 1.16 the effect of such technological advances.
1.17 "MPX Space" -- Floor space provided or to be provided by SES for the use
of MPX to install its digital access, cross connect and other equipment.
1.18 "New Building" -- Any new repeater or terminal building required on a
Route Segment.
1.19 "Power Equipment" -- All power sources and other necessary and related
articles of Equipment (other than Electronic Equipment) required in connection
with the operation of the Electronic Equipment in order to provide usable end-
to-end Capacity over any portion of the System.
1.20 "Primary Capacity" -- The term "Primary Capacity" shall have the meaning
given to it in the Georgia Agreement and the Alabama Agreement. The Primary
Capacity shall cease to exist on the Restatement Date and be functionally
superseded by the SES Interest.
1.21 "Route Segment" -- A portion of the MPX System and the SES System
between one of the numbered pairs of locations set forth in the Route Segment
Exhibits.
1.22 "Route Segment Exhibits" -- The term "Route Segment Exhibits" refers
collectively to Exhibits D, E, F, G, and H.
1.23 "Scheduled Completion Date" -- The date on which the installation of
Cable on a Route Segment is scheduled to be completed, as indicated in the
applicable Route Segment Exhibit.
1.24 "Scheduled Illumination Date" -- The date on which the Equipment on a
Route Segment is scheduled to be fully operational, as indicated in the
applicable Route Segment Exhibit.
1.25 "SES Electric Facilities" -- Electric transmission and distribution
lines, structures, poles, conduits and rights-of-way owned or controlled by
Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Electric,
SEGCO, or any combination thereof.
1.26 "SES Space" -- Floor space provided or to be provided by MPX for the use
of SES optronics, multiplex, and associated equipment.
1.27 "Specifications" -- The performance specifications for the System set
forth in Exhibit A hereto.
1.28 "Third Party Fibers" -- Optical fibers contained within the same
physical cable with SES Fibers and MPX Fibers on a Route Segment to the
exclusive use of which one or more persons or entities OTHER THAN SES and MPX is
entitled, either on an indefeasible right of user basis or the equivalent or by
reason of the beneficial ownership of such optical fibers.
In addition to the foregoing, certain other terms are defined hereinafter.
2. ROUTE SEGMENTS.
2.1 Existing Route Segments. The Parties have heretofore installed
certain Cables on SES Electric Facilities on the Route Segments identified in
Exhibit D, which indicates for each Route Segment the number of optical fibers
and the amount of Capacity comprising the Primary Capacity, the Additional
Capacity, the SES Interest, and the MPX Interest, respectively, as well as the
number of Third Party Fibers, if any.
2.2 SES Route Segments. SES has heretofore installed, or will
hereafter install certain Cables on SES Electric Facilities, a portion of which
it agrees as provided herein to make available to MPX, on the Route Segments
identified in Exhibit E, which indicates for each Route Segment the number of
optical fibers and the amount of Capacity comprising the SES Interest and the
number of optical fibers comprising the MPX Interest, as well as the number of
Third Party Fibers, if any.
2.3 MPX Route Segments. MPX has heretofore installed, or will
hereafter install certain Cables in locations other than on SES Electric
Facilities, a portion of which it agrees as provided herein to make available to
SES, on the Route Segments identified in Exhibit F, which indicates for each
Route Segment the number of optical fibers and the amount of Capacity comprising
the SES Interest and the number of optical fibers comprising the MPX Interest,
as well as the number of Third Party Fibers, if any.
2.4 AT&T Route Segments. SES has heretofore installed certain Cables
on SES Electric Facilities pursuant to agreements with AT&T Communications of
the Southern States, Inc. ("AT&T"), a portion of which it agrees as provided
herein to make available to MPX for certain limited uses on the AT&T Route
Segments identified in Exhibit G, which indicates for each AT&T Route Segment
the number of optical fibers comprising the Limited MPX Fibers.
2.5 New Route Segments. The Parties agree to install Cables pursuant
to this Agreement, on SES Electric Facilities except as indicated, on the Route
Segments identified in Exhibit H, which indicates for each Route Segment the
number of optical fibers and the amount of Capacity comprising the SES Interest
and the number of
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optical fibers comprising the MPX Interest, as well as the number of Third Party
Fibers, if any.
2.6 Additional Route Segments. In the event that the Parties agree
after the Restatement Date to install Cables pursuant to this Agreement on any
additional Route Segments or to make available to each other any Fibers or
Capacity on any other Route Segments on which Cable has been or is hereafter
installed by one of the Parties, they shall prepare and execute one or more
attachments to Exhibits E, F, G, or H, as applicable, identifying such Route
Segments and indicating for each the number of optical fibers and the amount of
Capacity comprising the SES Interest and the number of optical fibers comprising
the MPX Interest, as well as the number of Third Party Fibers, if any.
3. FIBERS AND CAPACITY.
3.1 Generally. Each Route Segment shall consist of the number of
optical fibers and associated electronics indicated in the applicable Route
Segment Exhibit.
3.2 WDM Windows on Shared Fibers. Shared Fibers, identified as such
in the Route Segment Exhibits, shall be shared by the Parties utilizing
wavelength division multiplexing technology (or an equivalent technology
allowing for multiple, related or unrelated lasers to induce multiple signals
onto a common fiber), with the cost thereof apportioned as indicated in the
Route Segment Exhibits.
3.3 SES Interest. The SES Interest on each Route Segment shall
consist of--
3.3(a) SES Fibers-- Title to and the exclusive right to use the number
of optical fibers identified as "SES Fibers" on the applicable Route Segment
Exhibit;
3.3(b) Title to Certain MPX Fibers and Shared Fibers-- Title to the
number of optical fibers identified as "MPX Fibers" and "Shared Fibers" on
the applicable Route Segment Exhibit, in the case of MPX Fibers and Shared
Fibers physically located in any right-of-way of Mississippi Power;
3.3(c) WDM Windows-- The exclusive use of the number of WDM Windows, if
any, for wavelength division multiplexing over any Shared Fibers, as
indicated on the applicable Route Segment Exhibit;
3.3(d) SES Capacity-- The use of Equipment providing the amount of
Capacity identified as "SES Capacity" on the applicable Route Segment
Exhibit, provided over the MPX Fibers or Shared Fibers on such Route Segment;
and
3.3(e) Service Drops-- The use of Equipment providing access to the SES
Capacity as indicated on each Route Segment Exhibit.
3.4 MPX Interest. The MPX Interest on each Route Segment shall
consist of--
3.4(a) MPX Fibers and Shared Fibers--
3.4(a)(i) Title to the number of optical fibers identified as "MPX
Fibers" and "Shared Fibers" on the applicable Route Segment Exhibit,
except in the case of MPX Fibers and Shared Fibers physically located in
any right-of-way Mississippi Power, and;
3.4(a)(ii) the exclusive right to use the number of optical fibers
identified as "MPX Fibers" on the applicable Route Segment Exhibit,
regardless of location;
3.4(b) Limited MPX Fibers-- The right to use, solely for the limited
purposes identified in Paragraph 4.1(b), the number of optical fibers
identified as "Limited MPX Fibers" on Exhibit G; and
3.4(c) WDM Windows-- The exclusive use of the number of WDM Windows, if
any, for wavelength division multiplexing over any Shared Fibers, as
indicated on the applicable Route Segment Exhibit;
provided, however, that MPX shall provide to SES over such MPX Fibers and Shared
Fibers, if any, the SES Capacity indicated on the applicable Route Segment
Exhibit as provided in Paragraph 3.3(d).
3.5 Conveyances of Primary and Additional Capacity.
3.5(a) By MPX-- MPX hereby conveys to SES MPX's exclusive right to use
the Additional Capacity as defined in the Georgia Agreement and the Alabama
Agreement to the extent necessary to accomplish the allocation of optical
fibers and Capacity between the SES Interest and the MPX Interest as set
forth in this Section 3.
3.5(b) By SES-- SES hereby conveys to MPX SES's exclusive right to use
the Primary Capacity as defined in the Georgia Agreement and the Alabama
Agreement to the extent necessary to accomplish the allocation of optical
fibers and Capacity between the SES Interest and the MPX Interest as set
forth in this Section 3.
3.6 Use of SES Interest by MPX.
The Parties recognize that from time to time the SES Interest on some Route
Segments may exceed SES's requirements for telecommunications capacity over such
Route Segments, and that MPX may in many cases be able to make profitable use of
such SES Interest that is in excess of SES's requirements. Accordingly, MPX
shall be entitled upon reasonable notice to SES to use that portion of the SES
Interest not then being used or forecast for use within eighteen (18) months by
SES, in such amounts and between such locations as may be designated by MPX from
time to time upon reasonable notice to SES. Notwithstanding the foregoing, SES
may reclaim the use of any or all such SES Interest for use by SES at any time
and from time to time upon reasonable notice to MPX.
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Revenues received and expenses incurred by MPX in connection with any such use
of the SES Interest by MPX shall be deemed to be received and incurred in
connection with MPX's use of the MPX Interest for purposes of Section 7.
4. USE OF FIBERS AND CAPACITY.
4.1 By MPX.
4.1(a) MPX Fibers-- Throughout the Term of the Agreement, MPX may use (or
permit the use of) the MPX Fibers and the Capacity thereof for any lawful
purpose.
4.1(b) Limited MPX Fibers-- Notwithstanding Paragraph 4.1(a), throughout
the Term of the Agreement, MPX may use (or permit the use of) the Limited MPX
Fibers located on the AT&T Route Segments identified in Exhibit G and the
Capacity thereof for the sole purpose of providing redundancy to the route
operated by MPX into Columbus, Georgia on the Restatement Date.
Notwithstanding any other provision of this Agreement, MPX shall reimburse
SES for any amount that SES may become obligated to pay to AT&T by reason of
any use by or under the authority of MPX of the Limited MPX Fibers.
4.2 By SES.
4.2(a) During Term-- Throughout the Term of the Agreement, SES may use
(or permit the use of) the SES Fibers, the Capacity thereof, and the SES
Capacity for any lawful purpose; provided, however, that SES agrees that
except to the extent that it may be prohibited by law or regulatory policy
from restricting the resale of telecommunications services provided by SES,
and except for the SES Fibers located on the Meridian-Hattiesburg Route
Segment, the Hattiesburg-Landon Route Segment, and the Landon-Gulfport Route
Segment, it shall not use the SES Fibers or the Capacity thereof or the SES
Capacity to provide telecommunications transmission capacity to others for
resale in an aggregate amount to any single person or entity greater than
DS3; provided further, that the foregoing shall not be construed to prohibit
SES from using or permitting the use of the SES Fibers or the Capacity
thereof or the SES Capacity for any purpose solely on the ground that
(whether or not by reason of such use) SES is or would be prohibited by law
or regulatory policy from restricting the resale of telecommunications
services so provided; provided, moreover, that SES may nevertheless use the
SES Fibers and the Capacity thereof or the SES Capacity to provide
telecommunications transmission capacity to others for resale in aggregate
amounts greater than DS3 in the absence of any law or regulatory policy
prohibiting SES from restricting the resale of telecommunications services so
provided if it first makes a single payment to MPX in an amount equal to
three (3) times--
4.2(a)(i) the undepreciated balance (based upon straight line
depreciation over a period of forty (40) years), determined as of the
date of such payment, of MPX's total investment in Cables installed on
SES rights-of-way pursuant to this Agreement,
4.2(a)(ii) multiplied by a fraction,
4.2(a)(ii)(A) the numerator of which is the total number of fiber-
miles comprising the SES Fibers, and
4.2(a)(ii)(B) the denominator of which is the total number of fiber-
miles comprising the SES Fibers and the MPX Fibers.
4.2(b) Following Termination-- Following termination of the Agreement
for any reason, SES shall have the full beneficial ownership of--
4.2(c) all Cable and Equipment installed hereunder on SES Electric
Facilities, and
4.2(d) all Equipment and all Cable installed in other locations, in
either case, required to provide the SES Capacity over each and every Route
Segment;
and may use (or permit the use of ) all such Cable and Equipment and the
Capacity thereof for any lawful purpose.
4.3 Regulatory Approvals. Each Party represents and warrants to the
other that it shall not make any Capacity available to any other person or
entity or use any Capacity to provide any telecommunications service to any
other person or entity without first obtaining any and all governmental or
regulatory approvals or authorizations that may be required for such use of
Capacity by such Party.
5. OTHER CAPACITY TO BE PROVIDED TO SES BY MPX.
Throughout the Term of this Agreement, SES shall be entitled to the use of
fiber optic telecommunications capacity provided by MPX on MPX's network of
fiber optic telecommunications facilities (including, without limitation,
facilities not located on the Route Segments identified in this Agreement) in
such reasonable amounts (subject to available capacity) and between such
locations as may be designated by SES from time to time upon reasonable notice
to MPX upon terms and conditions, (including, without limitation, price) no less
favorable than the terms and conditions upon which MPX provides comparable
amounts of fiber optic telecommunications capacity to other persons or entities
other than Affiliates of MPX, except to the extent that MPX may lack any legal
or regulatory authority required in order to provide such fiber optic
telecommunications capacity to SES upon such terms and conditions.
6. USE OF SES ELECTRIC FACILITIES.
6.1 Availability of SES Electric Facilities. SES has made available
SES Electric Facilities for
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the continuous installation of Cable and Equipment on the existing Route
Segments identified in Exhibit D and shall make SES Electric Facilities
available as required to provide for a continuous location on which the Cable
and the Equipment can be placed along the Route Segments identified in Exhibit
H, except as indicated in such Exhibit. Space for Cable and Equipment shall be
made available on distribution poles of Alabama Power, Georgia Power, Gulf
Power, Mississippi Power and Savannah Electric pursuant to separate agreements
with Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah
Electric, respectively, the provisions of which shall prevail over the
provisions of this Agreement to the extent of any conflict.
6.2 Electric Facility Upgrades. SES shall, in consultation with MPX,
engineer, design, construct and install any and all Electric Facility Upgrades
on each and every Route Segment and shall be responsible for the acquisition of
all materials and supplies required for such Electric Facility Upgrades.
6.3 Reimbursement of Cost. MPX shall reimburse SES's Actual Cost
incurred in connection with Electric Facility Upgrades required by reason of the
installation of Cable or Equipment on SES Electric Facilities OTHER THAN
improvements or upgrades that are already scheduled, contemplated, or reasonably
necessary or that would have been reasonably necessary within the next five (5)
years in the absence of the installation of such Cable or Equipment.
7. PROFIT SHARING PAYMENTS.
7.1 Right to Payments. In addition to all other amounts payable to
SES by MPX as provided herein, in consideration of services provided by Southern
Development in connection with the negotiation, administration, and performance
of this Agreement, including, without limitation, technical consulting services,
design, engineering, procurement and construction planning, training, and
supervision and overall coordination of SES's administration and performance of
the Agreement, Southern Development shall for each calendar year during the Term
of this Agreement be entitled to a payment equal to two and eight-tenths percent
(2.8%) of MPX's Net Income from Operations ("Profit Sharing Payments"). Net
Income from Operations is defined as Income from Operations (pretax) less
Interest Expense plus any Interest or Other Income less any Provision for Income
Taxes. In the event that MPX allows an Exclusive User to use the MPX Fibers or
Limited MPX Fibers on any Route Segment as allowed by Subsection 4.1, the Net
Income from Operations of such Exclusive User, attributable to such MPX Fibers,
will be subject to the obligation to pay Southern Development the Profit Sharing
Payments. MPX shall by contract require each Exclusive User to pay such Profit
Sharing Payments to Southern Development and shall be liable to Southern
Development for any such Profit Sharing Payments that are not paid by any
Exclusive User. In the event that any Exclusive User is a partnership and not
directly subject to federal, state or local taxation, the Calculated Effective
Rate will be used to calculate the Provision for Income Taxes deducted from
Income from Operations to arrive at Net Income from Operations of such Exclusive
User. The Calculated Effective Rate will be equal to the effective rate for
financial reporting purposes that such Exclusive User would have if that
Exclusive User were directly subject to taxation. The effective rate for such
Exclusive User will be the effective rate for financial reporting purposes and
not for the purposes of income tax reporting; accordingly, the Calculated
Effective Rate will give effect to permanent differences, and not give effect to
temporary differences, between financial reporting income and taxable income as
defined by GAAP. The Calculated Effective Rate will be calculated each year
based upon the applicable state apportionments, federal tax rates, state tax
rates, and local tax rates. In the event that an Exclusive User has multiple
operations included in its financial statements, MPX shall by contract require
such Exclusive User to maintain its records in a manner which will allow the
determination of Net Income from Operations attributable to the MPX Fibers. If
certain expense items are not directly attributable to distinct operations of an
Exclusive User, such expense items will be allocated based upon the proportion
of revenue attributable to the MPX Fibers to total revenues of the Exclusive
User. SES and MPX agree that if MPX's or an Exclusive User's Net Income from
Operations for a calendar year is a negative amount, then SES has no obligation
to make any payment to MPX or any Exclusive User. MPX or any Exclusive User will
only be allowed to offset the cumulative impact of a negative Net Income from
Operations for a quarter against a positive amount for another quarter within
the same calendar year. In the event that a cumulative negative amount exists
for a calendar year, MPX or an Exclusive User will not be allowed to offset any
negative amount for one calendar year against positive amounts for future
calendar years for the purpose of determining the Profit Sharing Payments.
Southern Development shall be entitled to receive Profit Sharing Payments from
MPX and each Exclusive User for each calendar year in which MPX's or such
Exclusive User's Net Income from Operations attributable to the MPX Fibers is a
positive amount, without any deduction or offset by reason of the fact that
MPX's or another Exclusive User's Net Income from Operations for such calendar
year may be a negative amount. Accounting terms used in this Subsection 7.1 but
not otherwise defined shall have the meaning provided and be construed in
accordance with GAAP.
7.2 Manner of Payment. MPX and each Exclusive User shall make the
Profit Sharing Payments to Southern Development provided for in Subsection 7.1
quarterly within forty-five (45) days following the end of each of the first
three (3) calendar quarters in each calendar year, with the
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balance (including, without limitation, any adjustment required to correct for
overpayment or underpayment of any quarterly payment) payable within ninety (90)
days after the end of the calendar year.
7.3 Rates. MPX shall have the exclusive right to set all rates for
the provision of Capacity or the use of the MPX Fibers to others by MPX.
7.4 Treatment of Certain Revenues and Expenses. In determining the
Net Income from Operations of MPX or of any Exclusive User, revenues and
expenses associated with or resulting from any transaction or agreement between
MPX or such Exclusive User and any Affiliate of MPX or of such Exclusive User,
as the case may be, or any officer, director, or shareholder of MPX or such
Exclusive User, as the case may be, or of an Affiliate of MPX or such Exclusive
User, as the case may be, shall be treated as follows:
7.4(a) No such expense associated with or resulting from any such
transaction or agreement shall be taken into account to the extent that such
transaction or agreement is not in the ordinary course of business of MPX or
such Exclusive User, as the case may be, and pursuant to the reasonable
requirements of the business of MPX or such Exclusive User, as the case may
be, and upon fair and reasonable terms no less favorable to MPX or such
Exclusive User, as the case may be, than would be obtained in comparable
arms-length transactions or agreements with a person not an Affiliate of MPX
or such Exclusive User, as the case may be, or such an individual; and
7.4(b) The revenue received by MPX or such Exclusive User, as the case
may be, from such transaction or agreement shall be deemed to be not less
than the revenue that would be obtained in comparable arms-length
transactions or agreements with a person not an Affiliate of MPX or such
Exclusive User, as the case may be, or such an individual.
7.5 Reports and Records.
7.5(a) MPX shall maintain full and complete books and records relating to
revenues received from the MPX Interest and all calculations of amounts due
to SES pursuant to this Section 7. SES, at its expense, shall be entitled to
review and copy such books and records during normal business hours upon
reasonable prior written notice to MPX. All such books and records shall be
retained for a period of at least six (6) years.
7.5(b) Within thirty (30) days after the close of each calendar month,
MPX shall deliver a report certified as true and correct by the chief
financial officer or treasurer of MPX setting forth for such month the amount
of MPX's Income from Operations, calculations of Southern Development's
Profit Sharing Payments and detailed financial statements of MPX (including
at least a balance sheet and a statement of income and cash flow in
accordance with GAAP) for the period then ended.
7.5(c) MPX shall deliver to SES copies of any audited financial
statements of MPX as soon as such statements are available. This Paragraph
7.5(c) shall not be construed to require MPX to prepare any audited financial
statements, but only to provide to SES any audited financial statements of
MPX that are prepared.
7.5(d) Upon the reasonable request of SES, MPX shall provide reports
regarding the revenues and expenses from MPX's use of the MPX Interest,
including without limitation, information regarding salaries, bonuses,
license fees, management fees, lease payments and such other items and in
such detail as SES may reasonably request.
7.5(e) MPX shall by contract require each Exclusive User to provide to
SES the same reports and access to its books and records to the same extent
as is required of MPX under Paragraphs 7.5(a), 7.5(b), 7.5(c), and 7.5(d) and
shall at the request of SES, but at its own expense, take all steps
reasonably necessary to enforce such rights of SES with respect to the books
and records of each Exclusive User.
8. TITLE TO PROPERTY; TAXES.
8.1 Land and Rights in Land. Title to all land or rights in land
obtained by SES pursuant to Subsection 20.1 shall be obtained on behalf of SES
and shall irrevocably vest in SES. Title to any land or rights in land obtained
by MPX under the power of eminent domain pursuant to Subsection 20.1 shall be
obtained on behalf of MPX and shall irrevocably vest in MPX, subject to a
perpetual easement in favor of SES as provided in Subsection 20.2. This
Agreement shall not constitute an assignment of any of SES's rights to use the
public or private property at the location of any facilities utilized in the
System.
8.2 Electric Facility Improvements. Title to all improvements to and
all materials employed in upgrading SES Electric Facilities, whether acquired
initially by SES or MPX, shall be obtained on behalf of SES and shall pass to
SES free of any lien or encumbrance created by or as a result of any action of
MPX upon construction or installation of such improvements and upgrades without
further action of the Parties.
8.3 Suspension Hardware.
8.3(a) Installed on Overhead Electric Transmission Facilities -- Title to
any and every item of suspension hardware used to attach, affix or install
Cable or Equipment on SES's overhead electric transmission facilities,
whether acquired initially by SES or MPX, shall be obtained on behalf of SES
and shall pass to SES free of any lien or encumbrance created by or as a
result
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of any action of MPX upon delivery of such item to SES without further action
of the Parties.
8.3(b) Installed on Rights-of-Way of Mississippi Power -- Title to any
and every item of suspension hardware used to attach, affix or install Cable
in any location on any right-of-way of Mississippi Power, whether acquired
initially by SES or MPX, shall be obtained on behalf of SES and shall pass to
SES upon delivery of such item to SES without further action of the Parties.
8.3(c) Installed Elsewhere -- Title to any and every item of suspension
hardware used to attach, affix or install Cable in any location other than on
SES's overhead electric transmission facilities or on any right-of-way of
Mississippi Power, if acquired initially by SES, shall be obtained on behalf
of MPX and shall pass to MPX free of any lien or encumbrance created by or as
a result of any action of SES (other than rights granted to SES under any
provision of this Agreement) upon installation of such item without further
action of the Parties.
8.4 Static Wire Portion of Cable. Title to the aluminum static wire
portion (if any) of any and every Cable installed on SES's overhead electric
transmission facilities or in SES's underground electric distribution conduits,
whether acquired initially by SES or MPX, shall be obtained on behalf of SES and
shall pass to SES free of any lien or encumbrance created by or as a result of
any action of MPX upon delivery to SES of the Cable of which it is a part
without further action of the Parties.
8.5 Protective Sheathing.
8.5(a) Installed on Rights-of-Way of Mississippi Power -- Title to any
protective sheathing or other material other than optical fibers or aluminum
static wire which is a part or component of any Cable installed on any right-
of-way of Mississippi Power, if acquired initially by MPX, shall pass to SES
upon installation of such item without further action of the Parties.
8.5(b) Installed Elsewhere -- Title to any protective sheathing or other
material other than optical fibers or aluminum static wire which is a part or
component of any Cable installed in any location OTHER THAN on any right-of-
way of Mississippi Power, if acquired initially by SES, shall pass to MPX
free of any lien or encumbrance created by or as a result of any action of
SES (other than rights granted to SES under any provision of this Agreement)
upon installation of such item without further action of the Parties.
8.6 MPX Fibers and Shared Fibers.
8.6(a) Installed on Rights-of-Way of Mississippi Power -- Title to the
MPX Fibers and any Shared Fibers within any and every Cable installed on any
right-of-way of Mississippi Power, if acquired initially by MPX, shall pass
to SES upon installation of such Cable without further action of the Parties.
8.6(b) Installed Elsewhere -- Title to the MPX Fibers and any Shared
Fibers within any and every Cable installed in any location OTHER THAN on any
right-of-way of Mississippi Power, if acquired initially by SES, shall pass
to MPX free of any lien or encumbrance created by or as a result of any
action of SES (other than rights granted to SES under other provisions of
this Agreement) upon installation of such Cable without further action of the
Parties.
8.7 SES Fibers. Title to the SES Fibers within any and every Cable,
if acquired initially by MPX, shall pass to SES free of any lien or encumbrance
created by or as a result of any action of MPX (other than rights granted to MPX
under other provisions of this Agreement) upon installation of such Cable
without further action of the Parties.
8.8 Equipment.
8.8(a) Existing Equipment -- Title to the Equipment in use on the
Restatement Date as provided in Subsection 12.1 is in SES. SES hereby conveys
to MPX all such Equipment used in connection with the MPX Fibers as of the
Restatement Date.
8.8(b) Additional Equipment --
8.8(b)(i) For Use with MPX Fibers and WDM Windows -- Title to any and
every item of Equipment acquired hereafter for use in connection with the
MPX Fibers or in connection with the exclusive use by MPX of a WDM Window
over Shared Fibers as provided in Subsection 3.2, whether acquired
initially by SES or MPX, shall be obtained on behalf of MPX and shall
pass to MPX free of any lien or encumbrance created by or as a result of
any action of SES (other than rights granted to SES under any provision
of this Agreement) upon installation of such item without further action
of the Parties.
8.8(b)(ii) For Use with SES Fibers and WDM Windows -- Title to any and
every item of Equipment acquired hereafter for use by SES in connection
with the SES Fibers or in connection with the exclusive use by SES of a
WDM Window over Shared Fibers as provided in Subsection 3.2, whether
acquired initially by SES or MPX, shall be obtained on behalf of SES and
shall pass to SES free of any lien or encumbrance created by or as a
result of any action of MPX (other than rights granted to MPX under any
provision of this Agreement) upon delivery of such item to SES without
further action of the Parties.
8.9 Title to Facilities Physically Located on Rights-of-Way of
Mississippi Power. Notwithstanding any other provision of this Agreement, title
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to any item of property physically located pursuant to this Agreement on any
right-of-way of Mississippi Power shall vest in SES upon installation of such
item of property in such location. Notwithstanding the foregoing, MPX shall have
the right to use, to redeploy and to retire any item of Equipment, to the
beneficial use of which it is entitled under the other provisions of this
Agreement, that is physically located on any right-of-way of Mississippi Power
to the same degree as if it were not so located, and upon removal of any such
Equipment from any such right-of-way of Mississippi Power, title to such item of
Equipment shall pass to MPX without further action of the Parties if and to the
extent that MPX would have held title to such item of Equipment but for the
provisions of the immediately preceding sentence.
8.10 Transfers of Title Upon Termination of Agreement. Upon termin-
ation of this Agreement for any reason, title to and absolute beneficial
ownership of--
8.10(a) any and all items of property (including without limitation,
all Cable) installed pursuant to this Agreement on SES Electric Facilities,
and
8.10(b) all Equipment and all Cable installed in other locations, in
either case, required to provide the SES Capacity over each and every Route
Segment shall pass to SES free of any lien, encumbrance or usage restriction
created by or as a result of any action of MPX without further action of the
Parties.
8.11 Tax Ownership. Notwithstanding the foregoing provisions of this
Section 8--
8.11(a) With respect to the SES Interest and any Cable and Equipment
related thereto, SES shall have absolute legal and beneficial ownership.
8.11(b) Except for the rights of utilization of the MPX Interest for
transmissions and the tax benefits inherent in such MPX Interest, neither the
use by MPX of the MPX Interest, nor the payments by MPX to SES provided in
Section 7 hereof, shall create or vest in MPX any legal easement or any other
legal ownership or property right in the System.
8.11(c) With respect to the MPX Interest and all Cable and Equipment
relating thereto which is physically located on any right-of-way of
Mississippi Power, SES shall hold legal title as MPX's nominee and with
respect to such property, MPX shall have full and absolute beneficial use
enjoying both the benefits and burdens of beneficial ownership with respect
to such property. Accordingly, MPX shall, for tax purposes, account for such
property as the owner thereof and as between the Parties shall, if available,
be entitled to the investment tax credit, depreciation and any other tax
attributes ("tax attributes") with respect to such property. SES agrees that
it will not, for tax purposes, account for such property as though SES were
the tax owner thereof and shall not attempt to claim any of the tax
attributes with respect thereto. The Parties hereto agree that they shall
file all tax returns and otherwise take all actions with respect to taxes in
a manner which is consistent with the foregoing. By way of illustration and
not limitation, specifically as reassurance to MPX that all investment tax
credit benefits available with respect to the MPX Interest which is
physically located on any right-of-way of Mississippi Power will be enjoyed
by MPX, SES agrees that it shall--
8.11(c)(i) not use, with the exception of testing for proper
operational functions, any of the "new section 38 property" (as defined
by the Internal Revenue Code of 1954, as amended, and pertinent
Regulations) of the MPX Interest which is physically located on any
right-of-way of Mississippi Power prior to use thereof by MPX so as
clearly to preserve original user status for MPX in all such property;
and
8.11(c)(ii) make all such written tax elections as may be requested by
MPX, file such election statements as instructed by MPX, and retain such
records as advised by MPX for purposes of the credit benefits referred to
above in accordance with the prescribed procedures of the Internal
Revenue Code of 1954, as amended, and pertinent Regulations.
8.11(d) Tax indemnification-- If, for any part of the System
represented by the MPX Interest which is physically located on any right-of-
way of Mississippi Power, the tax attributes are unavailable to MPX because
of SES's holding legal title, Southern Development's Profit Sharing Payments
under Section 7 of this Agreement shall be reduced. The amount of reduction
shall equal the additional federal, state and local income tax incurred and
payable by MPX as a result of the unavailability of such tax attributes. In
no event shall this amount exceed the LESSER OF--
8.11(d)(i) the Profit Sharing Payments to which Southern Development
is entitled under Section 7 of this Agreement, or
8.11(d)(ii) the actual reduction in the amount of SES's federal, state
and local income tax as a result of the availability to SES of those tax
attributes that are unavailable to MPX, further reduced by the amount of
any additional income tax liabilities of SES as a result of its ownership
of the portion of the System represented by the MPX Interest.
MPX will use its best efforts to avoid loss of any tax benefits contemplated
herein and shall promptly notify SES of any expected or actual adverse
determination and provide such further information to SES related to the
adverse determination as SES may reasonably request. In the event that the
amount to be indemnified exceeds
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SES's Profit Sharing Payments for the year in which such additional income
taxes are finally determined, the excess shall carry over to SES's Profit
Sharing Payments for future years.
8.11(e) Coordination-- In order to coordinate their treatment of the
System for tax purposes, SES and MPX annually shall each provide the other
with written notice prior to filing any income tax return of the proposed
treatment on such return of the assets comprising the System.
8.12 Additional Documents. It is the intention of the Parties hereto
that the vesting and passage of title as described in the foregoing sections of
this Section 8 shall, to the maximum extent permitted by applicable law, occur
without further action of the Parties. Notwithstanding the foregoing, however,
SES and MPX each agree to execute such other and further documents as may
reasonably be required to carry out or evidence the provisions of this
Section 8.
8.13 Security Interest and Subordination.
8.13(a) Covenant-- MPX hereby agrees and covenants that it will not
grant a lender or any other person or entity a security interest or
encumbrance or suffer or permit any other continuing material encumbrance to
attach upon property to which SES may be entitled during the term of this
Agreement or upon the termination hereof without the consent of SES.
8.13(b) Collateral-- To secure the performance by MPX of its
obligations to transfer title to and beneficial ownership of Cable and
Equipment to SES upon termination of this Agreement and of SES's rights of
first offer and first refusal pursuant to Subsection 32.2, MPX hereby grants
to SES a security interest in all fiber optic cable now owned or hereafter
acquired by MPX for installation on SES Electric Facilities and any and all
real and personal property, fixtures, equipment and rights associated
therewith, including, without limitation, suspension hardware, any aluminum
static wire portion of the Cable, protective sheathing, and all other
components of the Cable, and all Equipment now owned or hereafter acquired
and wherever located. All of such property is hereinafter collectively
referred to as the "Collateral" and shall also include all direct and remote
proceeds thereof.
8.13(c) Intercreditor and Subordination Agreement-- SES agrees to
negotiate in good faith with any lender providing financing to MPX for the
construction and operation of any of the facilities contemplated under this
Agreement with reference to a commercially reasonable subordination and
intercreditor agreement with such lender so as to facilitate such financing.
8.13(d) Financing Statements-- MPX hereby agrees to file any and all
financing statements, including, without limitation, UCC-1 notices, as
requested by SES to perfect the security interest granted hereby. MPX hereby
authorizes SES to file continuations to financing statements without the
signature of MPX.
9. PERFORMANCE OF WORK.
9.1 Standards and Procedures. All work required in connection with the
engineering, design, construction, installation, maintenance, and repair of
Cable and Equipment pursuant to this Agreement shall be carried out by employees
of the Parties and of Approved Contractors in accordance with the Standards and
Procedures set forth in Exhibit B, which may be revised from time to time by
written agreement of the SES Project Manager and the MPX Project Manager. Such
Standards and Procedures shall provide for prior approval by MPX of all
scheduled maintenance for which MPX is required to reimburse SES's Actual Cost.
To the extent that a matter is not addressed in Exhibit B--
9.1(a) SES shall employ standards and procedures consistent with those
that it employs in connection with the engineering, design, construction,
installation, maintenance, and repair of its internal telecommunications
network; and
9.1(b) MPX shall employ standards and procedures consistent with those
that it employs in connection with the engineering, design, construction,
installation, maintenance, and repair of other portions of its fiber optic
network.
9.2 Priority. No provision of this Agreement shall be construed--
9.2(a) to require SES to give a higher priority to the performance of work
pursuant to this Agreement than to the performance of work that in the sole
judgment of SES is necessary in connection with the generation, transmission,
or distribution of electric power or of matters reasonably related thereto;
or
9.2(b) to require MPX to give a higher priority to the performance of work
pursuant to this Agreement than to the performance of work that in the sole
judgment of MPX is necessary in connection with the operation, maintenance,
or repair of other portions of MPX's fiber optic network.
9.3 Approved Contractors. The SES Project Manager and the MPX Project
Manager shall develop a list of Approved Contractors for the performance of work
required in connection with the engineering, design, construction, installation,
maintenance, or repair of Cable or Equipment pursuant to this Agreement as an
Attachment to Exhibit B. Except as provided in Subsections 9.4 and 9.5, the
Party having responsibility hereunder for the performance of particular work
shall perform such work using employees of
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such Party or of its Affiliates, using Approved Contractors, or both. Until the
Project Managers agree upon an initial list of Approved Contractors, the list of
Approved Contractors shall be deemed to consist of all persons or entities
utilized by both Parties to perform work of the nature involved within the
twelve (12) month period immediately preceding the Restatement Date.
9.4 Right to Assume Responsibility. Subject to the provisions of
Subsection 9.5, in the event that the Party not having responsibility for the
performance of particular work required in connection with the engineering,
design, construction, installation, maintenance, or repair of Cable or Equipment
pursuant to this Agreement determines that the other Party on a recurring basis
is not performing such work in accordance with the Standards and Procedures set
forth in Exhibit B and in a timely fashion, the Party making such determination
may notify the other of such determination, whereupon the Project Managers shall
consult concerning the matter and shall use their best efforts to agree upon a
different allocation of responsibility or upon different procedures for the
performance of such work and shall revise Exhibit B accordingly. In the event
that the Project Managers are unable to agree upon a procedure or upon an
allocation of responsibility after consultation, then the position of the SES
Project Manager shall prevail with respect to all work that is required by
Subsection 9.5 to be performed by or under the direction of employees of SES,
and the position of the MPX Project Manager shall prevail with respect to all
other work.
9.5 Mandatory SES Work. SES's operating policies and procedures
require that work performed on or in connection with certain Electric Facilities
be performed by or under the direct supervision of employees of SES because of
considerations of reliability, safety, and economy in connection with SES's
electric utility operations. Accordingly, notwithstanding the preceding
provisions of this Section 9 or any other provision of this Agreement, MPX
agrees that work of the kind identified on Exhibit C will only be performed by
or under the direction, as specified in such Exhibit C, of employees of SES.
Exhibit C may be amended at any time by SES by written notice to MPX to reflect
changes in SES's operating policies and procedures requiring the performance or
direct supervision of work by employees of SES that SES applies generally to
facilities of others that are installed on or in SES Electric Facilities. MPX
hereby contracts with SES to provide all work of the nature or under the
circumstances identified in Exhibit C. Notwithstanding any provision of this
Agreement or the Exhibits hereto authorizing or requiring MPX to perform any
work or accomplish any result or giving MPX responsibility for any action, MPX
shall perform such work, accomplish such result, or carry out such
responsibility only by having such work performed for MPX by SES if such work or
the circumstances under which it is to be performed are so identified in
Exhibit C.
10. ENGINEERING AND DESIGN.
10.1 Cable.
10.1(a) Party Responsible-- The Party responsible for the engineering
and design of the Cable is specified for each Route Segment constructed after
the Restatement Date in the Route Segment Exhibits.
10.1(b) Scope-- The Party responsible for engineering and design of the
Cable on a Route Segment shall, in consultation with the other Party,
engineer and provide detailed specifications, construction working prints and
other data as necessary to permit construction and installation of the Cable
on such Route Segment as required to provide useable end-to-end Capacity over
such Route Segment in accordance with the Specifications set forth in Exhibit
A hereto as a total cost consistent with the budget for such Route Segment.
10.2 New Buildings.
10.2(a) Party Responsible-- The Party responsible for the engineering
and design of New Buildings is specified for each Route Segment constructed
after the Restatement Date in the Route Segment Exhibits.
10.2(b) Scope-- The Party responsible for engineering and design of New
Buildings on a Route Segment shall, in consultation with the other Party,
engineer and provide detailed specifications, construction working prints and
other data as necessary to permit construction of such New Buildings on such
Route Segment as required to provide sufficient space and support for all
Equipment to be used initially and, unless otherwise agreed, for a reasonably
foreseeable future period, to provide the Capacity on such Route Segment at a
total cost consistent with the budget for such Route Segment.
10.3 Power Equipment.
10.3(a) Party Responsible-- The Party responsible for the engineering
and design of the Power Equipment at each location is specified for each
Route Segment constructed after the Restatement Date in the Route Segment
Exhibits.
10.3(b) Scope-- The Party responsible for engineering and design of the
Power Equipment on a Route Segment shall, in consultation with the other
Party, engineer and provide detailed specifications, construction working
prints and other data as necessary to permit the acquisition and installation
of all Power Equipment required at each Location on such Route Segment in
accordance with the Specifications set forth in Exhibit A hereto at a total
cost consistent with the budget for such Route Segment.
10.4 Electronic Equipment.
10.4(a) Party Responsible-- The Party responsible for the engineering
and design of the Electron-
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ic Equipment at each location is specified for each Route Segment constructed
after the Restatement Date in the Route Segment Exhibits.
10.4(b) Scope-- The Party responsible for engineering and design of the
Electronic Equipment on a Route Segment shall, in consultation with the other
Party, engineer and provide detailed specifications, construction working
prints and other data as necessary to permit the acquisition and installation
of all Electronic Equipment required at each location to provide useable end-
to-end Capacity over such Route Segment in accordance with the Specifications
set forth in Exhibit A hereto at a total cost consistent with the budget for
such Route Segment.
10.5 Reimbursement of SES's Actual Cost. Except to the extent that the
budget for a particular Route Segment provides that SES shall bear a cost or
to the extent otherwise agreed in writing, MPX shall reimburse SES's Actual
Cost of carrying out its engineering and design responsibilities as provided
in this Section 10.
11. CONSTRUCTION AND INSTALLATION.
11.1 Cable.
11.1(a) Party Responsible-- The Party responsible for the construction
and installation of the Cable is specified for each Route Segment constructed
after the Restatement Date in the Route Segment Exhibits.
11.1(b) Scope-- The Party responsible for construction and installation
of the Cable on a Route Segment shall provide all supervision, labor and
tools required to construct and install the Cable and shall, in consultation
with the other Party, install the Cable on such Route Segment in a prudent
manner in accordance with the Specifications and the detailed design and
engineering pursuant to Section 10 (including, without limitation, obtaining
all required governmental permits or approvals for such installation) at a
total cost consistent with the budget for such Route Segment.
11.2 Splicing.
11.2(a) Party Responsible-- The Party responsible for splicing the Cable
is specified for each Route Segment in the Route Segment Exhibits.
11.2(b) Scope-- The Party responsible for splicing the Cable on a Route
Segment shall provide all supervision, labor and tools required to splice the
Cable and shall, in consultation with the other Party, splice the Cable on
such Route Segment in a prudent manner in accordance with the Specifications.
11.3 New Buildings.
11.3(a) Party Responsible-- The Party responsible for the construction
and installation of New Buildings is specified for each Route Segment
constructed after the Restatement Date in the Route Segment Exhibits.
11.3(b) Scope-- The Party responsible for construction and installation
of New Buildings on a Route Segment shall provide all supervision, labor and
tools required to construct and install the New Buildings and shall, in
consultation with the other Party, construct and install the New Buildings on
such Route Segment in a prudent manner in accordance with the Specifications
and the detailed design and engineering pursuant to Section 10 (including,
without limitation, obtaining all required governmental permits or approvals
for such construction) at a total cost consistent with the budget for such
Route Segment.
11.4 Power Equipment.
11.4(a) Party Responsible-- The Party responsible for the installation
of the Power Equipment at each location is specified for each Route Segment
constructed after the Restatement Date in the Route Segment Exhibits.
11.4(b) Scope-- The Party responsible for installation of the Power
Equipment on a Route Segment shall provide all supervision, labor and tools
required to install the Power Equipment and shall, in consultation with the
other Party, install the Power Equipment on such Route Segment in a prudent
manner in accordance with the Specifications and the detailed design and
engineering pursuant to Section 10 at a total cost consistent with the budget
for such Route Segment.
11.5 Electronic Equipment.
11.5(a) Party Responsible-- The Party responsible for the installation
of the Electronic Equipment at each location is specified for each Route
Segment constructed after the Restatement Date in the Route Segment Exhibits.
11.5(b) Scope-- The Party responsible for installation of the Electronic
Equipment on a Route Segment shall provide all supervision, labor and tools
required to install the Electronic Equipment and shall, in consultation with
the other Party, install the Electronic Equipment on such Route Segment in a
prudent manner in accordance with the Specifications and the detailed design
and engineering pursuant to Section 10 at a total cost consistent with the
budget for such Route Segment.
11.6 Reimbursement of SES's Actual Cost. Except to the extent that the
budget for a particular Route Segment provides that SES shall bear a cost, or to
the extent otherwise agreed in writing, MPX shall reimburse SES's Actual Cost of
carrying out its construction and installation responsibilities as provided in
this Section 11.
12. ACQUISITION OF MATERIALS, SUPPLIES AND EQUIPMENT.
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12.1 Existing Equipment. The Equipment heretofore acquired
and installed by the Parties for use in connection with the Primary Capacity and
the Additional Capacity is generally identified on Exhibit I. The omission of an
item of Equipment from such Exhibit I shall be of no significance if in fact
such item of Equipment was in use in connection with the Primary Capacity or the
Additional Capacity on the calendar day immediately preceding the Restatement
Date, nor shall the inclusion of an item of Equipment on such Exhibit I be of
any significance if in fact such item of Equipment was not in use in connection
with the Primary Capacity or the Additional Capacity on the calendar day
immediately preceding the Restatement Date. Except as otherwise provided herein
or agreed by the SES Project Manager and the MPX Project Manager, all such
existing Equipment shall continue (subject to replacement or upgrade as
necessary) to be used in connection with the optical fibers in connection with
which it was being used on the calendar day immediately preceding the
Restatement Date.
12.2 Responsibility for Acquisition. The Party responsible,
following consultation with the other Party, for the acquisition of materials,
supplies and Equipment in each of the following categories is indicated for each
Route Segment constructed after the Restatement Date in the Route Segment
Exhibits:
12.2(a) Cable-- All fiber optic or composite cable, splice
containers, suspension hardware and associated equipment and
apparatus required for the installation of the Cable on such Route
Segment;
12.2(b) New Buildings-- All materials and supplies required
for the construction of the New Buildings on such Route Segment;
12.2(c) Power Equipment-- All Power Equipment to be
installed on such Route Segment; and
12.2(d) Electronic Equipment-- All Electronic Equipment
to be installed on such Route Segment.
12.3 Conformity to Design. All materials, supplies and
Equipment acquired or provided by a Party pursuant to this Section 12 shall
conform to the Specifications and the detailed design and engineering pursuant
to Section 10 and be acquired or provided at a total cost consistent with the
budget for such Route Segment.
12.4 Responsibility for Cost. Notwithstanding the assignment
of responsibility for acquiring or providing materials, supplies and Equipment
pursuant to Subsection 12.2, the cost of such materials, supplies and Equipment
shall be borne as provided in this subsection 12.4 except to the extent
otherwise agreed in writing. To the extent provided in this Section 12.4, MPX
shall reimburse SES's cost of acquiring or providing materials, supplies and
Equipment. SES shall reimburse MPX's cost of acquiring or providing materials,
supplies and Equipment, or both. To the extent reasonably practical, such
reimbursements shall be accomplished after offsetting other reimbursements that
become due pursuant to this Subsection 12.4 at approximately the same time.
12.4(a) Cable-- MPX shall bear the cost of all fiber optic or
composite cable, splice containers, suspension hardware and
associated equipment and apparatus required for the installation of
the Cable on each Route Segment except in cases where the applicable
Route Segment Exhibit indicates that SES will bear such cost.
12.4(b) New Buildings-- MPX shall bear the cost of all
materials and supplies required for the construction of the New
Buildings on each Route Segment.
12.4(c) Equipment for Shared Fibers-- MPX shall bear the cost
of all Power Equipment and Electronic Equipment to be used in
connection with the Shared Fibers.
12.4(d) Equipment for Other MPX Interest-- MPX shall bear the
cost of all Power Equipment and Electronic Equipment to be used in
connection with the MPX Interest.
12.4(e) Certain Equipment for SES Interest-- MPX shall bear
the cost of the Power Equipment and Electronic Equipment identified
in the Route Segment Exhibits to be used in connection the SES
Interest.
12.4(f) Remaining Equipment for SES Interest-- Except as
provided in Paragraph 12.4(e), SES shall bear the cost of all
Electronic Equipment used in connection with the use of the SES
Fibers and with the exclusive use of WDM Windows over Shared Fibers
as provided in Subsection 3.2.
13. SCHEDULE.
13.1 Generally. The Parties shall use their best efforts to
complete the construction and installation of the Cable and New Buildings on
each Route Segment in accordance with the Scheduled Completion Date and to
install, configure and make operational all Equipment initially designated for
use to provide Capacity over such Route Segment in accordance with the Scheduled
Illumination Date, in each case, as indicated in the applicable Route Segment
Exhibit.
13.2 Completion. Upon completion of each Route Segment in
accordance with Sections 10 and 11, SES shall provide MPX written notice of said
completion, together with installed transmission parameters of the Route Segment
such as end-to-end loss and copies of all tests of the Route Segment utilized to
determine that the Route Segment meets all applicable technical standards and
the Specifications. Within forty-five (45) days after the date of such notice
from SES, MPX shall notify SES in writing whether MPX agrees
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that the Route Segment has been so completed, specifying any incompleteness
which MPX has identified. When MPX agrees that the Route Segment has been
completed, then the date of notice from MPX to such effect shall be deemed to be
the "Completion Date" for such Route Segment.
14. SPECIFICATIONS; TESTING.
14.1 Conformity to Specifications. The Parties shall carry out their
engineering, design, acquisition, construction, installation, consultation and
other responsibilities hereunder as required to cause the System to satisfy the
Specifications set forth in Exhibit A. SES and MPX may from time to time review
these Specifications and make modification thereto by written consent.
Notwithstanding the foregoing, upon written notice from MPX that the System
fails to satisfy any performance standards imposed upon MPX or its customers by
any state or federal regulatory authority having jurisdiction thereof, SES shall
exert its best efforts to bring the System into conformity with such performance
standard; provided, however, that MPX shall reimburse SES's Actual Cost in
connection with activities directed toward satisfaction of such performance
standard which is incurred prior to the receipt by SES from MPX of an
authorization or directive to abandon such efforts.
14.2 Responsibility for Testing. Responsibility for testing the System
on each Route Segment is indicated for such Route Segment in the applicable
Route Segment Exhibit. The Party not responsible for testing on a Route Segment
shall have the right to observe all such tests. All tests shall be carried out
in accordance with the testing procedures heretofore developed by the Parties,
as modified from time to time by agreement.
14.3 Test Equipment and Training Provided by MPX. MPX shall at its sole
expense provide test equipment for SES's use, training for SES personnel, and
spare parts (including, without limitation, spare cable) for use in connection
with SES's maintenance and repair responsibilities pursuant to this Agreement as
indicated in Exhibit J. SES shall not without MPX Approval use any of such test
equipment or spare parts except in connection with SES's maintenance and repair
responsibilities pursuant to this Agreement.
14.4 Reimbursement of Cost. MPX shall reimburse SES's Actual Cost of all
testing, whether performed before or after completion of the System and whether
performed routinely or at the specific request of MPX.
15. MAINTENANCE AND REPAIR.
15.1 Cable.
15.1(a) Party Responsible-- The Party responsible for the maintenance
and repair of the Cable is specified for each Route Segment in the Route
Segment Exhibits.
15.1(b) Scope-- The Party responsible for maintenance and repair of the
Cable on a Route Segment shall, in consultation with the other Party, provide
all supervision, labor and materials required for end-to-end maintenance and
restoral services for the Cable on such Route Segment, including, without
limitation, continual network monitoring, fault location, splicing and splice
testing associated with any restoration and replacement cable used in any
restoration, all in accordance with the Specifications set forth in Exhibit A
hereto and the provisions of Exhibit B.
15.2 New Buildings.
15.2(a) Party Responsible-- The Party responsible for the maintenance
and repair of New Buildings is specified for each Route Segment in the Route
Segment Exhibits.
15.2(b) Scope-- The Party responsible for maintenance and repair of New
Buildings on a Route Segment shall, in consultation with the other Party,
provide all supervision, labor and materials required for the maintenance and
repair of such New Buildings on such Route Segment, including, without
limitation, any expansion of any such New Building that may be required due
to space constraints when replacing or adding Equipment.
15.3 Power Equipment.
15.3(a) Party Responsible-- The Party responsible for the maintenance
and repair of the Power Equipment at each location is specified for each
Route Segment in the Route Segment Exhibits.
15.3(b) Scope-- The Party responsible for maintenance and repair of the
Power Equipment on a Route Segment shall, in consultation with the other
Party, provide all supervision, labor and materials required for the
maintenance and repair of all Power Equipment required at each location on
such Route Segment in accordance with the Specifications set forth in Exhibit
A hereto and the provisions of Exhibit B.
15.4 Electronic Equipment.
15.4(a) Party Responsible-- The Party responsible for the maintenance
and repair of the Electronic Equipment at each location is specified for each
Route Segment in the Route Segment Exhibits.
15.4(b) Scope-- The Party responsible for maintenance and repair of the
Electronic Equipment on a Route Segment shall, in consultation with the other
Party, provide all supervision, labor and materials required for the
maintenance and repair of all Electronic Equipment required at each location
on such Route Segment in
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accordance with the Specifications set forth in Exhibit A hereto and
the provisions of Exhibit B.
15.5 Network Monitoring. MPX will be maintaining a network
management system in accordance with the requirements of the Specifications set
forth in Exhibit A, which will monitor all transmission capacity being provided
using the MPX Interest. SES will advise promptly the MPX network monitoring
center of any material problems identified on the System, and the MPX network
monitoring center shall notify SES of any material problems on the System which
such center identifies. MPX shall make available to SES, if requested, terminal
access to its network monitoring center, so that SES may utilize the common
system in combination with, or in lieu of, its own monitoring system. SES shall
reimburse MPX for incremental equipment, telecommunications, and software
licensing expenses reasonably and actually incurred by MPX in connection with
providing such terminal access.
15.6 Reimbursement of SES's Actual Cost. Except as otherwise
agreed in writing, MPX shall reimburse SES's Actual Costs of carrying out its
maintenance and repair responsibilities as provided in this Section 15;
provided, however, that to the extent that SES incurs costs and expenses in
connection with operating, maintaining or repairing the SES Equipment or SES
Fibers being used by SES on a separate and segregated basis or in connection
with operating, maintaining or repairing the SES Equipment being used
exclusively by SES on a WDM Window pursuant to Subsection 3.2, such costs and
expenses shall not be included in SES's Actual Costs and shall not be
reimbursable by MPX. Reimbursable maintenance and repair activities shall
include any replacement of electronic equipment necessitated by technological
obsolescence (subject to MPX Approval of such replacement) or by the inability
to obtain replacement parts or repair services.
15.7 Upgrades and Rebuilding.
15.7(a) No Upgrades or Rebuilding of Buildings or Cable --
Notwithstanding any other provision of this Agreement, no substantial
expansion, upgrades, rebuilding or replacement of the buildings or
fiber optic cable portion of the System shall be required or
undertaken pursuant to this Agreement without the concurrence of both
SES and MPX; provided, however, that the foregoing shall not be
construed to preclude either Party from rebuilding or upgrading at
its own expense its own equipment or facilities without the
concurrence of the other Party.
15.7(b) Additions and Replacement of Equipment -- The Maximum
Capacity of the System on any Route Segment may exceed the Capacity
initially implemented on such Route Segment. Periodic additions of
Electronic Equipment to add Capacity are anticipated and will be
treated as if they were part of the initial construction. As
subsequent needs of the Parties require the installation of Equipment
to provide additional Capacity, the Party requiring such additional
Capacity shall provide written notice to the other of the date on
which such Capacity is to be made operable, and the Parties shall use
their reasonable best efforts to cause such Capacity to be made
available in a timely manner. Except as otherwise agreed, the
responsibilities and rights of both MPX and SES for such periodic
additions will be the same as those associated with the initial
construction. Each Party agrees to provide periodic forecasts to the
other Party setting forth such Party's best estimates of its future
needs for additional capacity, provided that such forecasts shall not
be binding, and each Party shall in any event provide reasonable
advance written notice to the other of all planned additions of
Electronic Equipment.
15.7(c) Redeployment of Equipment -- The redeployment on the
System by either Party of any item of Equipment removed from service
for any reason (including, without limitation, replacement of
functioning Equipment with Equipment providing greater Capacity)
shall be subject to the Approval of the other Party if with respect
to such item of Equipment following such redeployment the other
Party--
15.7(c)(i) would be responsible for performing maintenance
and repairs,
15.7(c)(ii) would be responsible for bearing the cost of
maintenance and repairs, or
15.7(c)(iii) would be entitled to the use of any of the
Capacity provided using such item of Equipment.
16. RESTORATION IN THE EVENT OF OUTAGES.
Upon any interruption of the Capacity of the System, including any
failure of such Capacity to satisfy the Specifications set forth in Exhibit A,
the Parties agree to take steps promptly to provide restoration of such Capacity
in accordance with Exhibit B. Upon any such interruption, the Party first
learning thereof promptly shall notify the other Party of the interruption. The
Parties shall proceed to determine the circumstances surrounding such
interruption and the efforts necessary to restore full complying Capacity,
including an estimation of the time by which such a restoration shall be
accomplished. If in the judgment of MPX the Parties will not be able to achieve
full restoration of the System within a time period which permits MPX to
adequately provide Capacity to its customers, then MPX shall be entitled--
16.1 to transfer any or all telecommunications services which
have been placed on the System to alternative telecommunications capacity until
such time as the Capacity is restored to service (with the result that all
revenues and costs with respect to such telecommunications services shall be
excluded from the computation of Profit Sharing Payments
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pursuant to Section 7 of this Agreement except to the extent that such
telecommunications services are transferred to the MPX Interest on another Route
Segment, the revenues and costs with respect to which are otherwise included in
such calculations);
16.2 to repair and restore the System or any portion thereof; or
16.3 to both transfer service to alternate telecommunications capacity
and participate in the repair and restoration of the System.
17. ALTERATION OF ROUTE.
Whenever during the term of this Agreement it may be necessary or
desirable from the standpoint of SES's electric utility operations to do so, SES
may upon reasonable notice to MPX relocate all or any part of the System to one
or more alternate routes or rights-of-way, so long as such relocation does not
reasonably interfere with the use of the System by MPX or unreasonably impair
the ability of MPX to provide its customers telecommunications services of the
type, quality and reliability contemplated by this Agreement. Unless and to the
extent otherwise agreed, any such relocations shall be accomplished without
interrupting service on the System. The provisions of Section 14 of this
Agreement concerning restoration of service and the utilization of MPX of
alternate transmission capacity shall apply to any such interruption. Unless
otherwise agreed by the Parties, any such relocation shall be at the sole
expense of SES. Notwithstanding the foregoing, in the event that MPX disagrees
with a decision by SES to relocate the Cable on any Route Segment, MPX may, at
its sole expense, relocate such Cable to a different alternate route or
otherwise provide for continuity of telecommunications service between the end
points of such Route Segment.
18. APPROVALS AND CONSULTATIONS.
Whenever pursuant to this Agreement, either Party is entitled to
approve a matter, the Project Manager (designated by written notice delivered to
the other Party of the identity of such Project Manager) (the "SES Project
Manager" if for SES, and the "MPX Project Manager" if for MPX) for the Party
responsible for the matter shall notify the Project Manager of the other Party
of the nature of such matter. The Project Managers shall discuss such matter,
and each Project Manager is hereby authorized to approve such matter on behalf
of his company. In no event shall any such approval be unreasonably withheld. If
the MPX Project Manager does not approve a matter, or conditions such approval
in a manner not acceptable to SES, then SES may, at its option and after
reasonable notice to MPX, either--
18.1 Complete performance in the manner deemed appropriate by the SES
Project Manager, in which event SES--
18.1(a) shall warrant that the System shall satisfy performance
standards at least as high as those which would be satisfied if SES had
performed in the manner deemed appropriate by the MPX Project Manner, and
18.1(b) shall not be entitled to reimbursement of its costs of such
performance to the extent such costs exceed the costs that would have been
incurred had SES performed in the manner deemed appropriate by the MPX
Project Manager; or
18.2 Complete performance in the manner deemed appropriate by the MPX
Project Manager, in which event--
18.2(a) SES shall be relieved of any obligation or liability in the
event that, as a result of such performance, the System fails to satisfy
any performance standard that otherwise would be applicable hereunder.
18.2(b) MPX shall reimburse SES's Actual Cost of performing in such
manner to the extent such cost is incurred prior to the receipt by SES of
authorization or directive from MPX to cease such performance or to
perform in some other manner, and
18.2(c) MPX shall reimburse SES for the reasonable costs of any measures
of ensure that the SES Interest satisfies all applicable performance
standards to the extent that such costs would not have been incurred if
the MPX Project Manager had approved performance in the manner deemed
appropriate by the SES Project Manager.
19. SES'S ACTUAL COSTS; BILLING AND VERIFICATION.
19.1 For purposes of this Agreement, "SES's Actual Cost" of performing
any activity shall consist of the sum of--
19.1(a) all amounts paid by SES to third party contractors or suppliers
in connection with such activity (including any financing charges directly
associated with or attributable to such amounts, but only to the extent
that such financing charges are paid to a person other than an Affiliate
of SES and are not the result of SES's negligent failure to pay any such
amount in a timely fashion), plus a markup determined in accordance with
Subsection 19.2 to cover the cost of contract administration,
19.1(b) all hourly wages paid by SES or any Affiliate of SES to
employees of SES or of such Affiliate for the performance of such activity
or an part thereof, plus a markup determined in accordance with Subsection
19.2 to cover an appropriate allocation of SES's employee compensation
other than hourly wages and of SES's overhead costs, and
19.1(c) a ratable protion of the salary of each salaried employee of SES
or any Affiliate of SES who is
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personally involved in such activity or any part thereof, determined by
multiplying the weekly, monthly or annual salary of each such employee by a
fraction, the numerator of which is the number of hours devoted to such
activity by such employee during any pay period and the denominator of which
is the sum of the total number of hours worked and the number of vacation
hours and sick leave hours taken by such employee in such pay period, plus a
markup determined in accordance with Subsection 19.2 to cover an appropriate
allocation of SES's employee compensation other than salaries and of SES's
overhead costs.
19.2 The markups referred to in Subsection 19.1 (hereinafter referred to
as the "Overhead Charges") are SES's standard overhead charges for such
activities, based upon the components set forth in Exhibit K hereto and an
allocation methodology reasonably consistent with the methodology in effect as
of the Restatement Date, and are intended to be exclusive of any profit to SES.
The Overhead Charges in effect on the Restatement Date are set forth in Exhibit
K hereto. The Overhead Charges shall be updated annually by written notice from
SES to MPX effective as of May 1 of each year and shall be subject to
verification in the discretion of MPX. The components set forth in Exhibit K may
be changed only by written agreement. In the event that SES changes the
methodology for determining Overhead Charges it shall provide the revised
methodology to MPX by written notice prior to implementing such revised
methodology.
19.3 In addition to the foregoing, with respect to operation and
maintenance of electronic and optronic equipment, SES's Actual Costs of
performing such activity shall include reasonable training expenses (including
wages or salaries paid during training plus appropriate percentages thereof) for
SES employees engaged or to be engaged in the performance of such activity, the
cost of any specialized tools or equipment (including test equipment) necessary
for the performance of such activity, and the cost of materials, supplies, tools
or equipment which are consumed in the course of performing such activity or are
used solely in the performance of such activity and of other reimbursable
activities hereunder.
19.4 Notwithstanding any other provision of this Agreement, no cost the
incurrence of which requires MPX Approval shall be included in SES's Actual Cost
if such MPX Approval was not obtained.
19.5 Notwithstanding any other provision of this Agreement but subject
to Paragraph 18.2(c), no cost incurred by SES in connection with operating,
maintaining or using SES Equipment or SES Fibers being used by SES on a separate
and segregated basis or the use of a WDM Window pursuant to Subsection 3.2 shall
be included in SES's Actual Cost.
19.6 SES shall calculate the amount of SES's Actual Cost reimbursable
for each calendar month after the end of such calendar month and shall send a
statement to MPX setting forth such amount, identifying the activity or
activities in connection with which each item of cost was incurred. MPX shall
pay the amount set forth in such statement (except for any disputed amount)
within thirty (30) days after the receipt of such statement. In addition to any
other right or remedy available to SES, if MPX fails to make any required
payment (including any disputed amount which ultimately is determined to be due)
within thirty (30) days after the date of such statement, then such overdue
payment shall be subject to a late payment charge equal to the interest rate
then being charged by Chemical Bank, New York, New York, to its largest and most
creditworthy commercial borrowers plus three percent (3%) per annum on the
outstanding amount so overdue, or such lesser amount as may be permitted by
applicable law.
19.7 SES shall on a regular basis, which shall be not less often than
monthly, provide to MPX appropriate and auditable evidence of SES's Actual Cost
(other than those components of SES's Actual Cost which are included in the
percentages to be added to the wages and salaries of SES's employees). All
claims or reimbursement by SES shall be subject to appropriate certification by
MPX.
19.8 Upon the reasonable request of MPX, SES shall make its books and
records available to MPX for the purpose of determining whether the percentages
to be added to the wages and salaries of SES's employees are fulfilling their
intended purpose as set forth in Subsection 19.2.
20. EASEMENTS AND PUBLIC RIGHTS-OF-WAY.
20.1 For Cable Installed on SES Electric Facilities. MPX shall
reimburse SES for SES's out-of-pocket costs in perfecting rights-of-way and
upgrading franchise rights, but only to the extent that such perfection of
rights-of-way and upgrading of franchise rights are required because of the
addition of fiber optic telecommunications facilities for the System to the
other facilities of SES utilizing, or permitted to be utilized on, such rights-
of-way and franchises or because of the use of the System by MPX or its
customers. If the cost of right-of-way perfection for any single tract or any
single franchise upgrade is expected by SES to exceed Five Hundred Dollars
($500.00), SES shall notify MPX. SES and MPX shall agree upon proper action. MPX
will not be responsible to pay in excess of Twenty-Five Thousand Dollars
($25,000.00) for all right-of-way perfection and franchise upgrade without its
further consent. However, if this limit is exceeded, MPX will, in good faith,
negotiate with SES a fair cost allocation for such excess, taking into account,
among other things, SES' efforts to minimize such costs. SES shall
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exert its best efforts to eliminate or minimize any such out-of-pocket costs. If
the use of the power of eminent domain is necessary in order to acquire any such
additional rights, then any required condemnation action shall be brought in the
name and for the use of MPX at MPX's sole expense. This Subsection is not
intended as an acknowledgment by either Party that any such acquisition of
additional rights is required, but only to allocate the responsibility for such
acquisition if required.
20.2 For SES Interest Not Located on SES Electric Facilities. In each
and every location where the SES Interest is to be provided pursuant to this
Agreement using facilities installed in any location other than on SES Electric
Facilities, MPX shall use its best efforts to acquire at no expense to SES any
and all easements, rights-of-way, licenses, permits, franchises, or other
authorizations of kind or nature that may be required to permit the operation,
maintenance and use by SES of such SES Interest in such location throughout the
Term of this Agreement and, for the use and benefit of SES, in perpetuity
thereafter, and shall provide appropriate written evidence of such easements,
rights-of-way, licenses, permits, franchises, or other authorizations to SES
upon request. MPX shall use its best efforts to obtain any or all such
easements, rights-of way, licenses, permits, franchises, or other authorizations
in the name of SES to the extent required in order to insure SES's right to use
the SES Interest in such location throughout the Term of this Agreement and to
operate, maintain, renew, replace, and use the SES Interest in perpetuity
following termination of this Agreement for any reason.
20.3 Street Franchises. MPX shall at its own expense obtain all street
franchise rights that may be required for the installation of the Cable or the
MPX Interest in public rights-of-way or the use thereof by MPX.
20.4 Fees. MPX shall either pay directly or reimburse SES for any fees
payable to governmental entities for the use of public rights-of way solely as a
result of the construction, installation, operation, maintenance or presence of
the Cable (other than solely for the use of the SES Interest by SES) or MPX's
use of or right to use the MPX Interest. SES shall either pay directly or
reimburse MPX for any fees payable to governmental entities for the use of
public rights-of-way solely as a result of SES's use of the SES Interest.
21. TERM; TERMINATION.
21.1 Original and Renewal Terms. The original term of this Agreement
(the "Original Term") shall commence on the Restatement Date and end on the
twentieth (20th) anniversary of the Restatement Date (the "Original Termination
Date"). MPX shall have the right and option, by giving written notice as
described below, to extend and renew the Term of this Agreement for two
additional periods of tens years each (each such additional term referred to as
a "Renewal Term"), such Renewal Terms to begin immediately following expiration
of the Original Term, or the immediately preceding Renewal Term, as the case may
be, and to end respectively on the tenth and twentieth anniversaries of the
Original Termination Date. If MPX desires to exercise one or more of said
options to renew the Term of this Agreement, MPX shall give SES written notice
thereof at least nine months prior to the commencement of the Renewal Term with
respect to which MPX desires to exercise said option. The Original Term and any
Renewal Terms are collectively referred to herein as the "Term."
21.2 Termination. This Agreement may be terminated prior to the end of
the Term as follows:
21.2(a) By Mutual Agreement-- This Agreement may be terminated at any
time by mutual agreement of SES and MPX.
21.2(b) For Default-- Either Party in its sole discretion may
terminate this Agreement by written notice upon the occurrence of an event of
default by the other Party, and the failure to cure such default as provided
in Subsection 22.1.
21.2(c) As Otherwise Provided-- This Agreement also may be terminated
as expressly provided by any other provision of this Agreement.
21.3 Rights Upon Termination. Unless otherwise agreed in writing, upon
termination of this Agreement for any reason--
21.3(a) the transfers of title provided for in Subsection 8.10 shall
occur without further action of the Parties;
21.3(b) MPX shall forthwith cease all use of the MPX Interest; and
21.3(c) all other rights and obligations of the Parties under this
Agreement shall terminate except for--
21.3(c)(i) any obligations which have accrued prior to such termination,
and
21.3(c)(ii) indemnification obligations resulting from events which
occurred prior to such termination, and
21.3(c)(iii) obligations which pursuant to an express provision of this
Agreement are to survive any termination of this Agreement;
provided, however, that in no event shall the foregoing provisions of this
Subsection 21.3 be construed to provide a defense to any attempt by either
Party to obtain legal or equitable redress of any kind or nature for any
breach of this Agreement by the other Party prior to such termination.
22. DEFAULT; REMEDIES.
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22.1 Events of Default. The occurrence of any of the following events,
acts or circumstances shall be and constitute an event of default under this
Agreement:
22.1(a) Failure by a Party to pay in full any amount payable under this
Agreement within thirty (30) days after such payment is due in the absence of
a bona fide dispute concerning the obligation to make such payment and the
continuance of such failure for thirty (30) days after the other Party has
given written notice of such failure;
22.1(b) Failure by a Party to observe, perform or comply with any of the
terms, covenants, agreements or conditions contained in this Agreement to be
observed, performed or complied with by such Party within the time provided
herein for such observance, performance or compliance (or, in the event that
no definite time is provided herein for such observance, performance or
compliance, within a reasonable time) other than the failure to make timely
payments as described in Paragraph 22.1(a), and (unless a different notice
and cure period or no notice and cure period is provided for in another
provision of this Agreement) the continuance of such failure for thirty (30)
days after the other Party has given written notice of such failure, or, when
the cure reasonably requires more than thirty (30) days, the failure to
commence to cure such failure with such period of thirty (30) days and to
thereafter diligently and continuously prosecute such cure to completion;
22.1(c) Any convenant, agreement, representation or warranty made by a
Party herein or in any document, certificate or other statement now or
hereafter furnished by such Party, such Party's Project Manager, or any
officer of such Party in connection with this Agreement, which shall prove at
any time to have been materially untrue, false or misleading as of the time
when made and which materially and adversely affects the rights of the other
Party under this Agreement; or
22.1(d) The making by a Party of a general assignment for the benefit of
such Party's creditors; or the filing by a Party of a voluntary petition in
bankruptcy; or the filing of a petition in bankruptcy or other insolvency
protection against a Party which is not dismissed within ninety (90) days
thereafter; or the filing by a Party of any petition or answer seeking,
consenting to, or acquiescing in reorganization, arrangement, adjustment,
composition, liquidation, dissolution or similar relief, under any present or
future law, or the filing by a Party of an answer admitting or failing to
deny the material allegations of a petition against such Party for any such
relief; or the admission by a Party in writing of such Party's inability to
pay such Party's debts as they mature.
22.2 Limitation of Remedies. Notwithstanding any other previsions of
this Agreement, neither Party hereto shall be liable to the other for any
special, indirect or consequential damages or lost revenues or lost profits to
anyone arising out of this Agreement or the performance or non-performance of
any activities pursuant to this Agreement, even if such Party has been informed
of the possibility of such damages.
22.3 Specific Performance. MPX and SES hereby acknowledge and agree
that the fiber optic telecommunications facilities to be designed, engineered,
acquired, installed, maintained and used as set forth in this Agreement and the
rights of MPX and SES therein are unique, and that each Party's remedy at law
with respect to any material breach by the other of its obligations relating
thereto hereunder would be inadequate. Each Party hereby waives any defense that
a remedy at law would be available or adequate to remedy any such material
breach of this Agreement. Accordingly, each Party agrees that the other shall be
entitled to a decree of specific performance in addition to any other remedy
available at law or inequity for any such material breach of this Agreement.
22.4 Remedies Cumulative. Except as otherwise expressly provided
herein, no remedy conferred by any of the specific provisions of this Agreement
is intended to be exclusive of any other remedy. The election of any one remedy
by a Party hereto will not constitute a waiver of the right to pursue other
available remedies.
23. INSURANCE.
At all times during the term of this Agreement, each Party shall at its own
sole expense maintain such property and casualty insurance as it deems
appropriate to protect its interests. Neither Party shall have--
23.1 any obligation to obtain, provide, or maintain any property or
casualty insurance for the benefit to the other Party; or
23.2 any claim to any proceeds of any policy of property or casualty
insurance maintained by the other Party.
24. CASUALTY.
If the whole or any part of the equipment or other facilities utilized by SES
in the System are damaged or destroyed by fire or other casualty, then in any
such event SES shall promptly repair and restore such equipment and facilities,
or provide substituted equipment and facilities, as necessary to restore the
System to full compliance with the provisions of this Agreement; provided,
however, that in any such event MPX shall be entitled to terminate this
Agreement by written notice to SES; provided further, that MPX shall reimburse
SES, as part of SES's Actual Cost of maintaining the System, for the cost of
restoring the System to the extent that such cost is not covered by insurance
maintained by SES in accordance with Section 23 hereof.
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25. INDEMNIFICATION AND LIMITATION OF LIABILITY.
25.1 MPX shall indemnify SES and hold it harmless from and against the
payment of any and all sums of money (including court costs and reasonable
attorneys' fees) which SES may be called upon to pay by reason of any injury to
or death of any employee, contractor or agent of MPX, or any damage to the
property of MPX or of any employee, contractor or agent of MPX, except to the
extent that such injury, death or damage is determined to have been caused by
the willful or wanton conduct of SES or its employees, officers or agents.
25.2 SES shall indemnify MPX and hold it harmless from and against the
payment of any and all sums of money (including court costs and reasonable
attorney's fees) which MPX may be called upon to pay by reason of any injury to
or death of any employee, contractor or agent of SES, or any damage to the
property of SES or of any employee, contractor or agent of SES, except to the
extent that such injury, death or damage is determined to have been caused by
the willful or wanton conduct of MPX or if its employees, officers or agents.
25.3 SES shall indemnify and hold MPX harmless from and against any and
all liability, losses, damages, claims or causes of action and expenses
connected therewith (including reasonable attorney's fees) asserted by a person
other than MPX, its employees, contractors and agents and which is caused or
alleged to be caused by the negligence, gross negligence or willful and wanton
conduct of SES, its officers, employees or agents.
25.4 MPX shall indemnify and hold SES harmless from and against any and
all liability, losses, damages, claims or causes of action and expenses
connected therewith (including reasonable attorney's fees) asserted by a person
other than SES, its employees, contractors and agents and which is caused or
alleged to be caused by the negligence, gross negligence or willful and wanton
conduct of MPX, its officers, employees or agents.
25.5 Notwithstanding the provisions of Subsections 25.3 and 25.4, if it
shall be demonstrated that an injury to or death of a person, other than the
employees, contractors, and agents of SES and MPX, or damage to property owned
by a person other than SES, MPX, or an employee, contractor or agent of either,
shall have been caused in part by the negligence, gross negligence or willful
and wanton conduct of SES, its officers, employees or agents, and in part by the
negligence, gross negligence or willful and wanton conduct of MPX, its officers,
employees, or agents, then SES and MPX shall each bear the liability for such
proportion of such injury, death, or damage for which the trier of fact shall
determine such Party to have been casually responsible or, in the absence of
such a finding, one-half of such liability.
25.6 MPX shall indemnify and hold harmless SES from and against any
penalties, fines, forfeitures or expenses (including reasonable attorney fees)
arising out of any failure or refusal by MPX or any customer of MPX to comply
with any law, statute, regulation, rule, ordinance, order, injunction, writ,
decree or award of any government or political subdivision thereof, or any
agency, authority, bureau, commission, department or instrumentality thereof, or
any court, tribunal or arbitrator, applicable to the ownership, operation,
maintenance or use of the System or to the furnishing of telecommunications
services. For purposes of this Subsection 25.6, the phrase "any customer of MPX"
shall include any person whose use of the System (whether lawful or not) derives
from MPX's exclusive right to use the MPX interest.
25.7 SES shall indemnify and hold harmless MPX from and against any
penalties, fines, forfeitures or expenses (including reasonable attorney fees)
arising out of any failure or refusal by SES or any customer of SES to comply
with any law, statute, regulation, rule, ordinance, order, injunction, writ,
decree or award of any government or political subdivision thereof, or any
agency, authority, bureau, commission, department or instrumentality thereof, or
any court, tribunal or arbitrator, applicable to the ownership, operation,
maintenance or use of the System or to the furnishing of telecommunications
services. For purposes of this Subsection 25.7, the phrase "any customer of SES"
shall include any person whose use of the System (whether lawful or not) derives
from SES's exclusive right to use the SES Interest.
25.8 MPX shall indemnify and hold harmless SES from and against any and
all liability, losses, damages, claims or causes of action and expenses
connected therewith (including reasonable attorney's fees) asserted by MPX or
any customer of MPX by reason of any outage or interruption in the operation of
the System or of any failure of the System accurately to transmit any message.
For purposes of this Subsection 25.8, the phrase "any customer of MPX" shall
include any person whose use of the System (whether lawful or not) derives from
MPX's exclusive right to use the MPX Interest. Except as provided in Subsection
25.10, in the event of a conflict between the provisions of this Subsection 25.8
and those of any other Subsection of this Section 25, the provisions of this
Subsection 25.8 shall prevail.
25.9 SES shall indemnify and hold harmless MPX from and against any and
all liability, losses, damages, claims or causes of action and expenses
connected therewith (including reasonable attorney's fees) asserted by SES or
any customer of SES by reason of any outage or interruption in the operation of
the System or of any failure of the System accurately to transmit any message.
For purposes of this Subsection 25.9, the phrase "any customer of SES" shall
include any person whose use of the System (whether lawful or not) derives from
SES's exclusive right to use the SES
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Interest. Except as provided in Subsection 25.10, in the event of a conflict
between the provisions of this Subsection 25.9 and those of any other Subsection
of this Section 25, the provisions of this Subsection 25.9 shall prevail.
25.10 In the event of a conflict between provisions of Subsection 25.8
and 25.9, the provisions of Subsection 25.8 shall prevail to the extent that the
complaining person is a customer of MPX, and the provisions of Subsection 25.9
shall prevail to the extent that the complaining person is a customer of SES.
25.11 Notwithstanding any provision of this Agreement, in no event shall
SES's aggregate liability to MPX, whether based upon indemnity or otherwise,
exceed an amount equal to the sums invested by MPX in the engineering,
construction and installation of the System.
26. ACCESS AND SECURITY.
26.1 SES agrees, upon reasonable request, to allow MPX direct ingress
and egress to and from all MPX Space to be provided to MPX at the Points of
Presence as described above, and to permit MPX to be on SES's premises at such
times as may be required for MPX to perform any appropriate maintenance and
repair of the MPX Equipment located at such MPX Space. SES may require that a
representative of SES accompany any representatives of MPX having access to the
MPX Space. Employees and agents of MPX shall, while on the premises of SES,
comply with all rules and regulations, including security requirements and,
where required by government regulations, submission of satisfactory
governmental clearances.
26.2 MPX and MPX's designees shall have the right to visit any of the
facilities of SES (other than the MPX Space) utilized in providing the System
upon reasonable prior written notice to SES, provided that SES may require that
a representative of SES accompany any representatives of MPX or of an MPX
designee making such visit. Such visitation right shall include the right to
inspect the System and to review worksheets, to review performance or service
data, and to review other documents used in conjunction with this Agreement.
Employees and agents of MPX or of an MPX designee shall, while on the premises
of SES, comply with all rules and regulations, including security requirements
and, where required by government regulations, submission of satisfactory
governmental clearances.
26.3 MPX shall provide to SES a list of MPX's or MPX designees employees
who are performing work on, or who have access to, the MPX Space. SES shall have
the right to notify MPX that certain MPX or MPX designees employees are excluded
if, in the reasonable judgment of SES, the exclusion of such employees is
necessary for the proper security and maintenance of SES's facilities.
27. CONFIDENTIALITY.
27.1 Each Party agrees to provide to the other Party such information as
shall be necessary to permit performance of their respective obligations
hereunder. Each Party hereto shall, at or prior to the time of providing
information, identify in writing all Confidential Information provided by such
Party to the other Party to this Agreement. Neither Party hereto will, without
the prior written consent of the Party providing such Confidential Information--
27.1(a) use any portion of such Confidential Information for any purpose
other than performance pursuant to this Agreement, or
27.1(b) disclose any portion of such Confidential Information to any
persons or entities other than the officers and employees of such Party who
reasonably need to have access to the Confidential Information for purposes
of performance under this Agreement and who are bound by appropriate
confidentiality agreements and commitments consistent with those utilized by
such Party in protecting its own confidential information.
Nothing herein shall be construed to prohibit SES from utilizing Confidential
Information of a technical nature provided by MPX in connection with SES's
operation, maintenance and use of the SES Interest or other telecommunications
facilities of SES or to prohibit MPX from utilizing Confidential Information of
a technical nature provided by SES in connection with MPX's use of the MPX
Interest or other telecommunications facilities of MPX, notwithstanding the fact
that such activities might not, for some purposes, be deemed to be performance
pursuant to this Agreement.
27.2 The obligations of a recipient Party with respect to Confidential
Information shall remain in effect (during and after the Term of this Agreement)
except to the extent that--
27.2(a) such Confidential Information becomes generally available to the
public other than as a result of unauthorized disclosure by the recipient or
persons to whom the recipient has made the information available,
27.2(b) such Confidential Information has been released without
restriction by the Party providing the Confidential Information to another
person or entity,
27.2(c) such Confidential Information was received by the recipient on a
non-confidential basis from a third party lawfully possessing and lawfully
entitled to disclose such information, or
27.2(d) the recipient Party is able to establish that the Confidential
Information was independently developed or discovered by employees or agents
of such Party who had not knowledge of the Confidential Information by reason
of the disclosure hereunder.
Confidential Information shall remain the property of the disclosing Party, and
shall be returned to the disclosing Party
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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.
28. OTHER ACTIVITIES OF PARTIES.
Each Party may engage in and possess interests in other business ventures of
any nature whatsoever, and may conduct all activities, including activities in
connection with fiber optic and other telecommunications facilities, except as
specifically and explicitly limited pursuant to this Agreement. Nothing in this
Agreement is intended, or shall be interpreted, to restrict either Party in
connection with any such activity contemplated pursuant to this Agreement, so
long as a Party does not violate any specific, explicit restriction or
obligation set forth in this Agreement. Without limiting the generality of the
foregoing, nothing in this Agreement shall be construed or interpreted to
prohibit SES from installing, or permitting others to install, additional
telecommunications capacity, including fiber optic transmission capacity, within
the rights-of-way constituting any Route Segment, or from operating such
telecommunications capacity (alone or in combination with others) in competition
with the MPX Interest.
29. DISPUTE RESOLUTION.
Each party to this Agreement agrees to use good faith efforts to negotiate
and resolve any controversy or claim between the Parties hereto arising out of
or relating to this Agreement or any breach thereof (a "Dispute"). If a Dispute
cannot be resolved through such efforts, then either Party may seek resolution
of a Dispute by submitting such Dispute to a "Dispute Committee," consisting of
one designee of each Party, by a written submission delivered to the other
Party. The Dispute Committee shall consider the Dispute within the 30 day period
following the date of such submission.
If any Dispute cannot be resolved by the Dispute Committee within said period
in accordance with the procedures set forth in the preceding paragraph, then
both Parties shall be entitled to pursue their remedies at law and in equity
with respect to the dispute. During the pendency of a Dispute, the Parties shall
continue to satisfy all of their obligations pursuant to this Agreement.
30. CONDITIONS PRECEDENT.
All obligations of the Parties 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. The Parties agree to
exert their best efforts to obtain all such approvals 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.
31. NOTICES.
All notices or other communications required to be given hereunder shall be
in writing and delivered either personally or by mail, courier, or similar
reliable means of dispatch, or by facsimile ("FAX"), addressed as follows:
31.1 To SES.
Southern Development and Investment Group, Inc.
64 Perimeter Center East
Atlanta, GA 30346
Attn: Robert E. Jones
FAX: 404-668-4877
with additional copies (which shall not constitute notice) to:
Southern Company Services, Inc.
64 Perimeter Center East
Atlanta, GA 30346
Attn: Robert Beason
FAX: 404-668-4059
and
Southern Company Services, Inc.
64 Perimeter Center East
Atlanta, GA 30346
Attn: Manager, Telecommunications New Business
FAX: 404-668-4617
and
Troutman Sanders
5200 NationsBank Plaza
600 Peachtree Street, N.E.
Atlanta Georgia 30308
Attn: Robert P. Edwards, Jr.
------------------------
FAX: (404) 885-3900
------------------------
31.2 To MPX.
MPX Systems, Inc.
440 Knox Abbott Drive, Suite 240
Cayce, SC 29033
Attn: Michael D. Blackwell
FAX: 803-343-2387
with an additional copy (which shall not constitute notice) to:
SCANA Corporation
1426 Main Street
Columbia, SC 29218
Attn: General Counsel
FAX: (803) 748-3336
Each Party may designate by notice in writing a new address or addressee for
itself to which any notice or other communication many thereafter be so given,
served or sent. Notices or other communications delivered personally shall be
effective for all purposes upon delivery and notices or other communications
delivered by any other means shall be effective for all purposes upon their
receipt by the Party to whom they are addressed. Notices or other communications
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transmitted by FAX shall be transmitted using a sending machine that creates a
written confirmation of the transmission, which confirmations shall be retained
by the sending Party for not less than three (3) years, and shall be deemed to
be received one (1) hour after the time-stamp placed on the FAX by the sending
machine if transmitted during the recipient's usual business hours at the
receiving location, and one (1) hour after the start of recipient's usual
business hours at the receiving location on the next business day if transmitted
at any other time.
32. ASSIGNMENT; RIGHT OF FIRST OFFER/REFUSAL.
32.1 By SES.
32.1(a) Prohibition of Assignment-- SES may not assign this Agreement,
in whole or in part, whether by operation of law or otherwise, without the
prior written consent of MPX, which shall not be unreasonably withheld or
delayed, and any purported assignment of this Agreement by SES without such
consent shall be void ab initio; provided, however, that the foregoing shall
not be construed to limit the right of SES to transfer, sell, or convey to
any person or entity, subject to the rights of MPX hereunder, any or all of
the Electric Facilities on or in which any item of Cable or Equipment may now
or hereafter be installed pursuant to this Agreement. For purposes of this
Paragraph 31.1(a), a consolidation or merger of The Southern Company with or
into any other corporation, a consolidation or merger of any other
corporation with or into The Southern Company, or a change of control of The
Southern Company shall not be deemed to be an assignment of this Agreement by
SES.
32.1(b) Right of First Negotiation-- If at any time, or from time to
time, during the term of this Agreement, SES intends to transfer, sell, or
convey to any person or entity any or all of the Electric Facilities on or in
which any item of Cable or Equipment may now or hereafter be installed
pursuant to this Agreement as permitted by Paragraph 32.1(a), and in
connection therewith shall desire irrevocably to transfer, sell, or convey
all or any portion of the SES Fibers installed on or in such Electric
Facilities, SES shall give MPX notice of its intention to transfer, sell, or
convey such Electric Facilities and its desire in connection therewith so to
transfer, sell, or convey such SES Fibers. MPX and SES shall thereafter
diligently negotiate in good faith with respect to the sale of such SES
Fibers to MPX. If such negotiations do not result in a definitive written
acquisition agreement, a written letter or other written agreement in
principle within thirty (30) days after such notice is given, for the sale or
transfer of such SES Fibers to MPX, then SES may sell or otherwise dispose of
such SES Fibers to the same person or entity to whom it transfers, sells, or
conveys the Electric Facilities on or in which such SES Fibers are installed.
If SES sells such SES Fibers as permitted by the immediately preceding
sentence, then MPX's right pursuant to this Paragraph 32.1(b) with respect to
the SES Fibers so sold by SES shall terminate and shall thereafter have no
force or effect.
32.2 By MPX.
32.2(a) Prohibition of Assignment-- MPX may not assign this Agreement,
in whole or in part, or transfer, sell, or convey all or any portion of the
Cable, Equipment, or MPX Fibers installed on any Route Segment, whether by
operation of law or otherwise, except in accordance with this Subsection
32.2, and any purported assignment, transfer, sale, or conveyance without
compliance with the provisions of this Subsection 32.2 shall be void ab
initio. For purposes of this Paragraph 32.2(a), a consolidation or merger of
MPX with or into any other corporation, a consolidation or merger of any
other corporation with or into MPX, or a change of control of MPX shall be
deemed to be an assignment of this Agreement by MPX. For purposes of the
preceding sentence, "control" means the possession, directly or indirectly,
of the power to vote on an aggregate basis at least fifty percent (50%) of
the outstanding voting capital stock of MPX, to elect a majority of the Board
of Directors of MPX, or to direct or cause a direction of management and
policies of MPX, whether through the ownership of voting securities, by
contract or otherwise.
32.2(b) Right of First Offer-- If at any time, or from time to time,
during the term of this Agreement, MPX shall desire to assign this Agreement,
in whole or in part, or to transfer, sell, or convey all or any portion of
the Cable, Equipment, or MPX Fibers installed on any Route Segment or
permanently and irrevocably to transfer the right to use any MPX Fibers
physically located on any right-of-way of Mississippi Power (the "Subject
Assets") (but shall not have received an unsolicited offer to purchase such
assets), MPX and SES shall thereafter diligently negotiate in good faith with
respect to the sale of the Subject Assets to SES. If such negotiations do not
result in a definitive written acquisition agreement, a written letter or
other written agreement in principle within thirty (30) days after such
notice is given, for the sale or transfer of the Subject Assets to SES, then
for a one hundred eighty (180) day period thereafter, MPX may offer to sell
or otherwise dispose of the Subject Assets to a third party for a price that
is not less than the most recent offer, if any, by SES for such Subject
Assets. If MPX sells the Subject Assets or any portion thereof pursuant to
any such agreement entered into during such
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Page 23 of 27
<PAGE>
Southern Electric System MPX Systems, Inc.
Revised and Restated Fiber Optic Facilities and Services Agreement
- --------------------------------------------------------------------------------
one hundred eighty (180) day period, then SES's rights pursuant to this
Paragraph 32.2(b) with respect to the Subject Assets so sold by MPX shall
terminate and shall thereafter have no force or effect. If and to the extent,
however, MPX has not entered into a definitive written acquisition agreement,
a written letter or other written agreement in principle with any third party
during such one hundred eighty (180) day period, or if MPX has entered into
such an agreement with a third party and the sale of any of the Subject
Assets pursuant thereto does not close, then MPX shall again be bound by the
provisions of this Paragraph 32.2(b) with respect to such of the Subject
Assets not so sold by MPX pursuant to such written letter or other written
agreement in principle entered into during such one hundred eighty (180) day
period.
32.2(c) Right of First Refusal-- If MPX shall receive at any time other
than the one hundred eighty (180) day period set forth in Paragraph 32.2(b),
an offer to purchase, acquire, or otherwise receive any or all of the Subject
Assets which MPX desires to accept (an "Offer"), MPX shall give SES written
notice of the Offer, accompanied by a copy of such Offer (with the name of
the offeror and other identifying information redacted), and such notice
shall constitute a binding offer from MPX to sell such Subject Assets to SES,
upon the terms and conditions set forth in the Offer. SES shall have a period
of thirty (30) days after SES's receipt of notice of the Offer to deliver to
MPX written notice of acceptance thereof pursuant to the terms set forth in
the Offer, subject to any regulatory approvals which SES deems are necessary
or appropriate; provided, however, in the event any or all of the purchase
price set forth in the Offer consists of property other than cash or
marketable securities, then SES shall have the right to substitute property
or cash equal to the fair market value of such property (determined by a
qualified appraiser, if necessary) for the payment of such portion of the
purchase price of the Subject Assets. SES shall have a one hundred eighty
(180) day period after giving written notice of the acceptance of the Offer
to obtain any and all regulatory approvals (including, without limitation,
the approval of the SEC pursuant to the Public Utility Holding Company Act of
1935, if required) which SES, in its reasonable discretion, determines are
necessary. SES shall exert its best efforts to obtain, and shall diligently
prosecute its applications for, all such necessary regulatory approvals as
promptly as reasonably practical, and MPX agrees to cooperate with SES in
seeking such approval; provided, however, that all fees and costs related
thereto shall be borne by SES.
32.2(d) Earnest Money--
32.2(d)(i) At the time of delivery to MPX of its notice of acceptance
of the Offer, SES shall deposit with an escrow agent designated by SES,
subject to the reasonable approval of MPX, an earnest money ("Earnest
Money") payment equal to any cash earnest money payment included in the
Offer.
32.2(d)(ii) SES shall direct such escrow agent to pay MPX the Earnest
Money in the event that SES's purchase of the Subject Assets is not closed
within one hundred eighty (180) days after the delivery of the Earnest
Money to the Escrow Agent; provided, however, the Earnest Money shall be
returned to SES if the purchase of the Subject Assets is not consummated
within the one hundred eighty (180) day period set forth in Paragraph
32.2(c) as a result of MPX's default in or breach of its obligations to
consummate such sale. If MPX becomes entitled to the Earnest Money, all
rights of SES under this Subsection 32.2 with respect to such of the
Subject Assets as to which a purchase by SES is not consummated shall
thereupon automatically terminate.
32.2(e) Closing-- The closing of the sale of the Subject Assets to
SES shall take place at SES's principal office on a date designated by SES
which shall be within thirty (30) days after the later of SES's notice of
acceptance of the Offer or the date all required governmental approvals are
obtained.
32.2(f) Transfer to Third Party--
32.2(f)(i) In the event SES fails to accept the terms of the Offer and
to deposit the Earnest Money as provided in Paragraph 32.2(d) within the
thirty (30) day period described in Paragraph 32.2(c), MPX shall have the
right to accept the Offer and close the sale of the Subject Assets within
the period which ends on the later of one hundred eighty (180) days after
the expiration or waiver of SES's rights to purchase the Subject Assets or
30 days after the date all required regulatory or other governmental
approvals are obtained, after which period MPX may not sell, assign,
transfer or otherwise dispose of the Subject Assets without again first
complying with Paragraph 32.2(c). In the event SES accepts the terms of
the Offer pursuant to Paragraph 32.2(c) but fails to close such purchase,
Paragraph 32.2(c) shall terminate with respect to the Subject Assets to
which such Offer relates and shall thereafter have no further force or
effect with respect to any subsequent Offer concerning such Subject
Assets.
32.2(f)(ii) As a condition to any sale, transfer, license, assignment or
other disposition of all or any portion of the Subject Assets to a third
party, such third party shall agree to assume the then remaining
obligations of MPX under this Agreement and, to
- --------------------------------------------------------------------------------
Page 24 of 27
<PAGE>
Southern Electric System MPX Systems, Inc.
Revised and Restated Fiber Optic Facilities and Services Agreement
- --------------------------------------------------------------------------------
document such obligations, shall execute a counterpart, become a party, or
execute an agreement with terms substantially similar, to this Agreement.
32.3 Right to Permit Others to Use Interest Not Affected. No provision
of this Agreement, including, without limitation, the preceding Subsections of
this Section 32, shall be construed to limit the right of SES or of MPX, as the
case may be, to permit the use of all or any portion of the SES Interest or the
MPX Interest, as the case may be, by any person or entity, including, without
limitation, on an indefeasible right of user basis, subject to the provisions
hereof.
32.4 Confidentiality. All information and communications required by
this Section 32 to be given by one Party to the other shall be treated as
Confidential Information.
33. GENERAL.
33.1 Access to Records. Upon the reasonable request of the other Party,
each party shall make all of its books and records available to (in the sole
discretion of the disclosing Party) the requesting Party or an independent
public accounting firm selected and paid by the requesting Party for the purpose
of verifying any amount payable to either Party by the other hereunder.
33.2 Expenses. Except for costs and expenses specifically assumed by a
Party under this Agreement, each Party hereto shall pay its own expenses
incident to this Agreement and the transactions contemplated hereunder,
including all legal and accounting fees and disbursements.
33.3 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.
33.4 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.
33.5 Amendment. This Agreement shall not be amended, altered or
modified, except by an instrument in writing duly executed by all Parties.
33.6 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 any 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
or permitted assigns.
33.7 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.
33.8 Independent Contractors. In all matters pertaining to this
Agreement, the relationship of SES and MPX shall be that of independent
contractors, and neither SES nor MPX 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 MPX and SES; and no Party hereto shall have the power to bind or
obligate any other Party. No Party hereto shall be liable or 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 social security, withholding and worker's compensation
responsibilities. Notwithstand-ing the foregoing, Southern Company Services,
Inc. is authorized to act on behalf of Alabama Power, Georgia Power, Gulf Power,
Mississippi Power, Savannah Electric, and SEGCO.
33.9 Exercise of Right. No failure or delay on the part of either Party
hereto in exercising any right, power or privilege hereunder and no court of
dealing between the Parties shall act 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.
33.10 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 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.
33.11 Survival. It is the express intention and agreement of the Parties
hereto that all covenants, agreements, statements, representations, warranties
and
- --------------------------------------------------------------------------------
Page 25 of 27
<PAGE>
Southern Electric System MPX Systems, Inc.
Revised and Restated Fiber Optic Facilities and Services Agreement
- --------------------------------------------------------------------------------
indemnities made in this Agreement shall survive the execution and delivery
of this Agreement.
33.12 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, including, without limitation,
the Georgia Agreement, as amended, and the Alabama Agreement, as amended;
provided, however, that all rights and obligations of the Parties under the
Georgia Agreement or the Alabama Agreement, or both, which have accrued prior to
the Restatement Date shall survive the execution of this Agreement to the extent
that they are not modified herein. This Revised and Restated Fiber Optic
Facilities and Services Agreement dated as of June 9, 1995 expressly supersedes
the provisional Revised and Restated Fiber Optic Facilities and Services
Agreement dated as of May 12, 1995.
33.13 Headings. 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.
33.14 Counterparts. 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 appear on one or more counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in any proof of this
Agreement to produce or account for more than the number of counterparts
containing the respective signatures of or on behalf of all the Parties.
34. COMPLETION OF EXHIBITS.
The Parties acknowledges that they have executed this Agreement without
completing Exhibits B, C, I, J, and K. SES and MPX agree to use their best
efforts to complete such Exhibits within one hundred eighty (180) days after the
Restatement Date, but no failure to complete any such Exhibit shall impair the
binding nature of this Agreement or affect the rights of the Parties as set
forth herein.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed on their behalf, as of the Restatement Date.
SOUTHERN DEVELOPMENT AND
INVESTMENT GROUP, INC.
By: /s/ Kevin Fletcher
--------------------------
Name: Kevin Fletcher
------------------------
(Printed or Typed)
Its: President
-------------------------
(Title)
By: /s/ Tommy Chisholm
--------------------------
Name: Tommy Chisholm
------------------------
(Printed or Typed)
Its: Secretary
------------------------
(Title)
(CORPORATE SEAL)
- --------------------------------------------------------------------------------
Page 26 of 27
<PAGE>
Southern Electric System MPX Systems, Inc.
Revised and Restated Fiber Optic Facilities and Services Agreement
- --------------------------------------------------------------------------------
MPX SYSTEMS, INC.
By: /s/ M. D. Blackwell
------------------------------
Name: M. D. Blackwell
----------------------------
(Printed or Typed)
Its: Executive Vice President
----------------------------
(Title)
Attest: /s/ W. B. Timmerman
--------------------------
Name: W. B. Timmerman
----------------------------
(Printed or Typed)
Its: Sr. Vice President
----------------------------
(Title)
(CORPORATE SEAL)
- --------------------------------------------------------------------------------
Page 27 of 27
<PAGE>
Exhibit 10.16
FIRST AMENDMENT TO
REVISED AND RESTATED
FIBER OPTIC FACILITIES AND SERVICES
AGREEMENT
This FIRST AMENDMENT TO REVISED AND RESTATED FIBER OPTIC FACILITIES AND
SERVICES AGREEMENT (this "Amendment") is entered into as of July 24, 1995 (the
"First Amendment Date") by and between SOUTHERN DEVELOPMENT AND INVESTMENT
GROUP, INC. ("Southern Development"), a corporation organized and existing under
the laws of the State of Georgia and having its principal place of business at
64 Perimeter Center East, Atlanta, GA 30346, on behalf of itself and as agent
for Alabama Power Company ("Alabama Power"), Georgia Power Company ("Georgia
Power"), Gulf Power Company ("Gulf Power"), Mississippi Power Company
("Mississippi Power"), Savannah Electric and Power Company ("Savannah
Electric"), Southern Electric Generating Company ("SEGCO") and Southern Company
Services, Inc. ("SCSI") (Southern Development, Alabama Power, Georgia Power,
Gulf Power, Mississippi Power, Savannah Electric, SEGCO and SCSI being
collectively referred to herein as the "Southern Electric System" or "SES"), and
MPX Systems, Inc., a corporation organized and existing under the laws of the
State of South Carolina with offices at 440 Knox Abott Drive, Suite 240, Cayce,
SC 29033 ("MPX").
W i t n e s s e t h :
WHEREAS, SES and MPX entered into a Revised and Restated Fiber Optics
Facilities and Services Agreement (the "Agreement"), dated as of June 9, 1995
(the "Restatement Date"), providing for the installation and operation of fiber
optic telecommunications facilities on, in and under electric transmission and
distribution facilities of SES and elsewhere and the use thereof by SES and MPX;
WHEREAS, the parties desire to correct certain errors and omissions in
the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants hereinafter set forth, and other good and valuable consideration,
the receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. AMENDED DEFINITION.
The Agreement is amended by striking Definition 1.13 in its entirety and
substituting therefor the following:
1.13 "Exclusive User" -- A person or entity with which MPX has a
direct contractual relationship permitting such person or entity the exclusive
use of all or substantially all of the MPX Fibers and the Capacity thereof on
any Route Segment OTHER THAN the Route Segments identified on Exhibits D-6, D-7
and D-9.
2. PROFIT SHARING PAYMENTS.
The Agreement is amended by adding at the end of the first sentence of
Subsection 7.1 the phrase "derived from the use of the MPX Interest and the SES
Interest."
3. NOTICES.
The Agreement is amended by substituting "Kevin Fletcher" for "Robert
Jones" in the fourth line of Subsection 31.1.
4. ADDITIONAL EXHIBITS.
The Agreement is amended by deleting therefrom Exhibits H-1 through H-11
and substituting therefor Exhibits H(1)-1 through H(1)-14, which are attached
hereto and incorporated herein by this reference.
5. EFFECTIVE DATE OF AMENDMENT.
The revisions to the Agreement contained in this Amendment shall be
effective as of the Restatement Date.
6. RATIFICATION OF REMAINING PROVISIONS.
Except as expressly modified by the foregoing, the Agreement is not
otherwise altered or amended, and all remaining provisions thereof are hereby
ratified and affirmed.
<PAGE>
SOUTHERN ELECTRIC SYSTEM MPX SYSTEMS, INC.
REVISED AND RESTATED FIBER OPTIC FACILITIES AND SERVICES AGREEMENT
================================================================================
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed on their behalf, as of the Restatement Date.
SOUTHERN DEVELOPMENT AND
INVESTMENT GROUP, INC.
By: /s/THOMAS R. KELLOGG
----------------------------------
Name: Thomas R. Kellogg
--------------------------------
(Printed or Typed)
Its: V.P. & G.M. SDIG
---------------------------------
(Title)
Attest: /s/SAM H. DABBS, JR.
------------------------------
Name: Sam H. Dabbs, Jr.
--------------------------------
(Printed or Typed)
Its: Assistant Secretary
---------------------------------
(Title)
(CORPORATE SEAL)
MPX SYSTEMS, INC.
By: /s/M. D. BLACKWELL
----------------------------------
Name: M. D. Blackwell
--------------------------------
(Printed or Typed)
Its: Executive Vice President
---------------------------------
(Title)
Attest: /s/K. B. MARSH
------------------------------
Name: K. B. Marsh
--------------------------------
(Printed or Typed)
Its: Secretary
---------------------------------
(Title)
(CORPORATE SEAL)
- --------------------------------------------------------------------------------
PAGE 2 OF 2
<PAGE>
Exhibit 10.17
PARTIAL ASSIGNMENT AND ASSUMPTION OF
REVISED AND RESTATED FIBER OPTIC FACILITIES
AND SERVICES AGREEMENT
THIS PARTIAL ASSIGNMENT AND ASSUMPTION OF REVISED AND RESTATED FIBER
OPTIC FACILITIES AND SERVICES AGREEMENT (the "Assignment") is dated as of the
25th day of July, 1995 by and between MPX SYSTEMS, INC., a South Carolina
corporation ("Assignor"), and GULF STATES FIBERNET, a Georgia general
partnership ("Assignee").
WHEREAS, pursuant to Section 8.01 of the Agreement of Partnership of
Assignee dated as of August 17, 1994, as amended as of November 1, 1994 (the
"Partnership Agreement"), Assignor agreed to enter into agreements with Assignee
for the provision of fiber optic facilities and services on certain routes
pursuant to agreements to be negotiated by Assignor with Southern Company, an
affiliate of Southern Development and Investment Group, Inc., a Georgia
corporation ("Southern Development");
WHEREAS, Assignor and Southern Development, on behalf of itself and as
agent for Alabama Power Company ("Alabama Power"), Georgia Power Company
("Georgia Power"), Gulf Power Company ("Gulf Power"), Mississippi Power Company
("Mississippi Power"), Savannah Electric and Power Company ("Savannah
Electric"), Southern Electric Generating Company ("SEGCO") and Southern Company
Services, Inc. ("SCSI") (Southern Development, Alabama Power, Georgia Power,
Gulf Power, Mississippi Power, Savannah Electric, SEGCO and SCSI collectively
shall be referred to as the "Southern Electric System") are parties to that
certain Revised and Restated Fiber Optic Facilities and Services Agreement
entered into as of June 9, 1995 (the "Facilities and Services Agreement");
WHEREAS, for the purpose, among others, of satisfying its obligations
to Assignee in the Partnership Agreement, Assignor entered into the Facilities
and Services Agreement which provides for the provision of fiber optic
facilities and services to Assignor on such routes;
WHEREAS, subject to the terms of the Facilities and Services
Agreement, Assignor owns and has the right to use the MPX Interest (as defined
therein);
WHEREAS, pursuant to and as limited by Section 3.6 of the Facilities
and Services Agreement, MPX has the right to use the SES Interest (as defined
therein) to the extent not used by SES; and
WHEREAS, Assignor desires to assign to Assignee the Facilities and
Services Agreement and Assignor's rights thereunder to the extent related to
that portion of the MPX Interest described in Paragraph 2 below and
Assignor desires to
<PAGE>
assign to Assignee the right to use that portion of the SES Interest described
below 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 Facilities and Services Agreement.
2. Assignor does hereby assign, bargain, sell, transfer, convey and
deliver to Assignee and its successors and assigns the Facilities and Services
Agreement to the extent related to that portion of the MPX Interest consisting
of the specific routes listed on Schedule 1 attached hereto and made a part
----------
hereof (the "Routes") together with all rights and obligations of Assignor under
the Facilities and Services Agreement related to the Routes, including the
rights of an Exclusive User with respect to the Routes. Subject to the
provisions of Section 3.6 of the Facilities and Services Agreement, Assignor
does hereby grant to Assignee the exclusive right to use the SES Interest to the
extent related to the Routes, which right to use shall include, without
limitation, the rights of an Exclusive User with respect to the Routes.
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 Facilities and Services Agreement (i) related to that portion
of the MPX Interest assigned hereby, including all rights and obligations of an
Exclusive User thereof, and (ii) related to the right to use that portion of the
SES Interest granted hereby, including all rights and obligations of an
Exclusive User thereof.
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. The assignment and assumption effected hereby is subject to the
following additional terms and conditions:
(i) nothing herein shall be construed to relieve Assignor of any
of its obligations or liabilities under the Facilities and Services
Agreement insofar as the Southern Electric System is concerned;
(ii) nothing herein shall be construed to limit Assignor's right
to grant rights to use under Section 4.1(a) and Section 32.3 of the
Facilities and Services Agreement to the extent not inconsistent with
the terms hereof or not otherwise related to the subject matter
hereof;
-2-
<PAGE>
(iii) Assignor and Assignee hereby agree that in the event the
Southern Electric System makes a payment to Assignor pursuant to
Section 4.2(a) of the Facilities and Services Agreement, Assignor
shall remit to Assignee that portion of such payment that is allocable
to the Routes;
(iv) the obligations assumed by Assignee pursuant hereto shall
include the obligation to permit the Southern Electric System to use
fiber optic telecommunications capacity pursuant to Section 5 of the
Facilities and Services Agreement, subject to the terms of said
Section 5;
(v) Assignor and Assignee hereby agree that Assignee shall be
entitled to any proceeds from any assignment, transfer, sale or
conveyance pursuant to Section 32.2 of the Facilities and Services
Agreement allocable to the Routes or the other rights assigned hereby
and, in the event any of such proceeds are received by Assignor,
Assignor shall remit such proceeds to Assignee; provided, however,
that the foregoing shall not be construed to mean that Assignor shall
have the right to assign, transfer, sale or convey the Routes or the
other rights assigned hereby subsequent to the effectiveness hereof;
and
(vi) Assignor and Assignee hereby agree that no customer or
other individual or entity to whom Assignee sells or leases capacity
on any of the Routes shall be deemed an Exclusive User under the
Facilities and Services Agreement.
6. Assignee hereby agrees to indemnify, 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 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 Facilities
and Services 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 Facilities and
Services Agreement (except for covenants or conditions required to be performed
by Assignee by virtue of this Assignment).
-3-
<PAGE>
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:
MPX Systems, Inc.
440 Knox Abbot Drive, Suite 240
Csyce, SC 29033
Attention: Michael D. Blackwell
Telecopy No.: 803-343-2387
with an additional copy (which shall not constitute notice) to:
SCANA Corporation
1426 Main Street
Columbia, SC 29218
Attention: General Counsel
Telecopy No;: 803-748-3336
(ii) If to Assignee:
Gulf States FiberNet
206 West 9th Street
West Point, GA 31833
Attention: Chief Financial Officer
Telecopy No;: 706-645-8989
9. Southern Development, on its behalf and on behalf of the other
members of the Southern Electric System, by its execution below, hereby consents
to this Assignment and the assignment and assumption contemplated hereby and
waives the provisions of Section 32.2 of the Facilities and Services Agreement
to the extent applicable to this Assignment and said assignment and assumption.
The Southern Electric System further agrees that any notices required or
permitted to be sent by the Southern Electric System pursuant to the Facilities
and Services Agreement shall be sent both to Assignor at the address for
Assignor set forth in Section 31 of the Facilities and Services Agreement and to
Assignee at the address for Assignee set forth in Section 8 above.
10. 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
-4-
<PAGE>
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.
-5-
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have caused this Partial
Assignment and Assumption of Revised and Restated Fiber Optic Facilities and
Services Agreement to be executed as of the day and year first above written.
ASSIGNOR:
MPX SYSTEMS INC.
By: /s/ M. D. Blackwell
---------------------------------
Name: M. D. Blackwell
--------------------------
Title: Executive Vice President
--------------------------
ASSIGNEE:
GULF STATES FIBERNET
By: Gulf States Transmission Systems, Inc.,
General Partner
By: /s/ Doug Shumate
-------------------------------
Name: Doug Shumate
-------------------------
Title: VP/CEO
-------------------------
By: MPX Systems Inc.,
General Partner
By: /s/ M. D. Blackwell
---------------------------------
Name: M. D. Blackwell
-------------------------
Title: Executive Vice President
-------------------------
SOUTHERN DEVELOPMENT:
SOUTHERN DEVELOPMENT AND
INVESTMENT GROUP, INC., on its own
behalf and as agent for the other members of
the Southern Electric System
By: /s/ Thomas C. Kellogg
--------------------------------------
Name: Thomas C. Kellogg
--------------------------------
Title: V.P. & G.M. So. Dev & Inv. Group
---------------------------------
-6-
<PAGE>
Schedule 1
----------
Summary of Routes that are the subject of a certain Partial Assignment and
Assumption of Revised and Restated Fiber Optic Facilities and Services Agreement
<TABLE>
<CAPTION>
Southern Electric Systems & MPX Systems
Contract Date June 9, 1995
Exhibit Reference Route Segment
<S> <C>
D-1 Morrow-Plant Yates
D-3 Plant Yates-Water Works
D-4 Water Works-APC G.O
D-8 55 Park Place-Morrow (A)
E-1 Meridian-Hattisburg
E-2 Hattisburg-Landon
E-3 Landon-Gulfport
F-1 Meridian-Jackson
F-2 Newton-Forest
F-3 Jackson-Shreveport
H-(1)-1 Winder-55 Park Place
H-(1)-2 Winder-Gainesville Wachovia
H-(1)-3 Gainesville Wachovia-Gainesville GPC Dist. Office
H-(1)-4 Plant Gaston Birmingham
H-(1)-5 Birmingham-Meridian
H-(1)-7 Davis-West End
H-(1)-8 West End-Moreland
H-(1)-9 Tuxcaloosa Loop
H-(1)-11 APC G.O. Powell Ave
H-(1)-14 Davis-Plant Gaston
</TABLE>
<PAGE>
Exhibit 10.18
CONSENT FOR ASSIGNMENT OF INTEREST
relating to the Revised and Restated
Fiber Optics Facilities and Services
Agreement
THIS CONSENT is made as of February 20, 1997 among SCANA
COMMUNICATIONS, INC., a Mississippi corporation ("SCANA"), ITC HOLDING
COMPANY, INC., a Florida corporation, ("ITC"), GULF STATES FIBERNET, a Georgia
general partnership ("GSF"), GULF STATES TRANSMISSION SYSTEMS, INC., an
Arkansas corporation ("GSTS") and SOUTHERN DEVELOPMENT AND INVESTMENT
GROUP, INC., a Georgia corporation ("Southern Development").
WHEREAS, SCANA (formerly known as "MPX Systems, Inc.") and Southern
Development, on behalf of 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. (collectively, "SES") are parties to that certain Revised and
Restated Fiber Optic Facilities and Services Agreement dated June 9, 1995 (the
"Agreement");
WHEREAS, SCANA and GSF are parties to that certain Partial Assignment and
Assumption of the Agreement, dated as of July 25, 1995 (the "First Assignment")
wherein SCANA assigned its rights to the SES routes (as defined in the
Agreement), together with all rights and obligations of SCANA relating to those
routes to GSF, including SCANA's rights as an Exclusive User of those routes;
WHEREAS, Southern Development consented to the First Assignment, thereby
waiving its Rights of First Offer/First Refusal as defined in Section 32.2 of
the Agreement;
WHEREAS, SCANA now desires to assign to ITC its partnership interests in
GSF, as well as its fiber optic network assets, including, without limitation,
its ownership interest in and all rights to use all cable and equipment under
the Agreement;
WHEREAS, GSF now desires to assign to GSTS all of GSF's assets and
liabilities, including, without limitation, all rights, duties, and obligations
under the Agreement obtained from the First Assignment, provided that GSTS
assumes and agrees to pay, perform and discharge all of GSF's duties and
obligations under the Agreement; and
WHEREAS, Southern Development is willing to permit the aforementioned
assignments by SCANA to ITC and GSF to GSTS, thereby waiving its Rights of First
Offer/First Refusal as defined in Section 32.2 of the Agreement.
<PAGE>
NOW, THEREFORE, the parties hereby agree as follows:
1. All capitalized terms not otherwise defined herein shall have the
meanings given such terms in the Agreement.
2. Southern Development hereby consents to the following assignments and
waives its rights under the provisions of Section 32.2 of the Agreement to the
extent applicable to the Assignments:
(i) SCANA shall assign and transfer to ITC all partnership
interests in GSF and all right, title and interest to all SCANA fiber
optic network assets, including without limitation, its ownership
interest to and all rights to the use of fiber optic cable and
equipment governed by the Agreement; and
(ii) GSF shall assign and transfer to GSTS all GSF's assets and
liabilities, including, without limitation, all of its rights, duties,
and obligations under the Agreement, (collectively, the
"Assignments").
3. Southern Development's consent to the Assignments is subject to the
following additional terms and conditions:
(i) SCANA shall not be relieved of any of its obligations or
liabilities under the Agreement in relation to SES; and
(ii) ITC and GSTS shall execute such other documents as Southern
Development may reasonably request from time to time to obtain full
benefit of the Assignments and for ITC and GSTS to assume full
responsibility for all obligations and rights under the Agreement.
4. Unless otherwise provided in this Consent, all notices, requests,
demands and other communications in connection with this Consent 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 pages below (or at such other
addresses as will be given in writing by the parties to one another) and will be
effective when delivered.
5. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
6. Except as hereby modified, amended or supplemented, the Agreement
shall remain in full force and effect, and any reference hereafter made by any
party hereto to the Agreement shall be deemed to refer to the same as hereby
amended regardless of whether specific reference is made hereto.
2
<PAGE>
7. The validity, interpretation and performance of this Consent and each
of its provisions will be governed by the laws of Georgia.
SIGNED, SEALED AND DELIVERED.
SCANA COMMUNICATIONS, INC.,
formerly MPX Systems Inc.
By: /s/ K.B. Marsh
-----------------------------
Name: K.B. Marsh
----------------------
Title: VP & CFO
---------------------
Address:
TEL:
FAX:
Contact person:
ITC HOLDING COMPANY, INC.
By: /s/ Doug Shumate
-----------------------------
Name: Doug Shumate
----------------------
Title: Vice President
---------------------
Address:
TEL.
FAX:
Contact person:
(Signatures continued on the following page)
3
<PAGE>
GULF STATES FIBERNET
By: Gulf States Transmission Systems, Inc., general partner
By: /s/ Doug Shumate
-------------------------------
Name: Doug Shumate
Title: CFO
------------------------
Address:
206 West 9th Street
West Point, Georgia 31833
TEL: 800 239-3000
FAX: 205 850-3936
Contact person: Doug Shumate
GULF STATES TRANSMISSION SYSTEMS, INC.
By:/s/ Doug Shumate
------------------------------
Name: Doug Shumate
------------------------
Title: CFO
------------------------
Address:
TEL:
FAX:
Contact person:
(Signatures continued on the following page)
4
<PAGE>
SOUTHERN DEVELOPMENT AND INVESTMENT
GROUP, INC., on its own behalf and as agent
for the other members of the Southern Electric
System
By: /s/ Thomas R. Kellogg
---------------------------------------
Name: Thomas R. Kellogg
Title: Vice President & Gen'l Manager
------------------------------
Address:
64 Perimeter Center East
Atlanta, Georgia 30346
TEL: 770 821-4950
FAX: 770 821-2902
Contact person: Robert Beason
5
<PAGE>
Exhibit 10.19
SECOND PARTIAL ASSIGNMENT AND ASSUMPTION OF
REVISED AND RESTATED FIBER OPTIC FACILITIES
AND SERVICES AGREEMENT
THIS SECOND PARTIAL ASSIGNMENT AND ASSUMPTION OF REVISED AND RESTATED FIBER
OPTIC FACILITIES AND SERVICES AGREEMENT (the "Assignment") is dated as of the
27th day of March, 1997, by and between SCANA COMMUNICATIONS, INC.,
(formerly known as "MPX Systems, Inc.") a South Carolina corporation
("Assignor"), and ITC HOLDING COMPANY, INC., a Delaware corporation
("Assignee").
WHEREAS, Assignor and Southern Development, on behalf of itself and as
agent for Alabama Power Company ("Alabama Power"), Georgia Power Company
("Georgia Power"), Gulf Power Company ("Gulf Power"), Mississippi Power Company
("Mississippi Power"), Savannah Electric and Power Company ("Savannah
Electric"), Southern Electric Generating Company ("SEGCO") and Southern Company
Services, Inc. ("SCSI") (Southern Development, Alabama Power, Georgia Power,
Gulf Power, Mississippi Power, Savannah Electric, SEGCO and SCSI collectively
shall be referred to as the "Southern Electric System") are parties to that
certain Revised and Restated Fiber Optic Facilities and Services Agreement
entered into as of June 9, 1995 (the "Facilities and Services Agreement");
WHEREAS, subject to the terms of the Facilities and Services Agreement,
Assignor owns and has the right to use the MPX Interest (as defined therein);
WHEREAS, pursuant to and as limited by Section 3.6 of the Facilities and
Services Agreement, Assignor has the right to use the SES Interest (as defined
therein) to the extent not used by SES; and
WHEREAS, Assignor desires to assign to Assignee the Facilities and Services
Agreement and Assignor's rights thereunder to the extent related to that portion
of the MPX Interest described in Paragraph 2 below and Assignor desires to
assign to Assignee the right to use that portion of the SES Interest described
below on terms and conditions set forth herein;
WHEREAS, Southern Development has heretofore consented in writing to
Assignor's assignment to Assignee of the Facilities and Services Agreement and
Assignor's rights thereunder to the extent related to that portion of the MPX
Interest described in Paragraph 2 below and Assignor's assignment to Assignee of
the right to use that portion of the SES Interest described below 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 Facilities and Services Agreement.
<PAGE>
2. Assignor does hereby assign, bargain, sell, transfer, convey and
deliver to Assignee and its successors and assigns its remaining interest in the
Facilities and Services Agreement including, but not limited to, that portion of
the MPX Interest consisting of the specific routes listed on Schedule 1 attached
----------
hereto and made a part hereof (the "Routes") and all rights and obligations of
Assignor under the Facilities and Services Agreement related to the Routes,
including the rights of an Exclusive User with respect to the Routes.
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 Facilities and Services 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. The assignment and assumption effected hereby is subject to the
following additional terms and conditions:
(i) nothing herein shall be construed to relieve Assignor of any of
its obligations or liabilities under the Facilities and Services Agreement
insofar as the Southern Electric System is concerned until such time as
Assignor is released by the Southern Electric System thereunder;
(ii) nothing herein shall be construed to limit Assignor's right to
grant rights to use under Section 4.1(a) and Section 32.3 of the Facilities
and Services Agreement to the extent not inconsistent with the terms hereof
or not otherwise related to the subject matter hereof;
(iii) Assignor and Assignee hereby agree that in the event the
Southern Electric System makes a payment to Assignor pursuant to Section
4.2(a) of the Facilities and Services Agreement, Assignor shall remit to
Assignee that portion of such payment that is allocable to the Routes;
(iv) the obligations assumed by Assignee pursuant hereto shall
include the obligation to permit the Southern Electric System to use fiber
optic telecommunications capacity pursuant to Section 4 of the Facilities
and Services Agreement, subject to the terms of said Section 5;
2
<PAGE>
(v) Assignor and Assignee hereby agree that Assignee shall be
entitled to any proceeds from any assignment, transfer, sale or conveyance
pursuant to Section 32.2 of the Facilities and Services Agreement allocable
to the Routes or the other rights assigned hereby and, in the event any of
such proceeds are received by Assignor, Assignor shall remit such proceeds
to Assignee; provided, however, that the foregoing shall not be construed
to mean that Assignor shall have the right to assign, transfer, sale or
convey the Routes or the other rights assigned hereby subsequent to the
effectiveness hereof; and
(vi) Assignor and Assignee hereby agree that no customer or other
individual or entity to whom Assignee sells or leases capacity on any of
the Routes shall be deemed an Exclusive User under the Facilities and
Services Agreement.
6. 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:
SCANA Communications, Inc.
440 Knox Abbot Drive, Suite 240
Cayce, SC 29033
Attention: Peggy Warner
Telecopy No.: 803-343-2387
3
<PAGE>
with an additional copy (which shall not constitute notice) to:
SCANA Corporation
1426 Main Street
Columbia, SC 29218
Attention: General Counsel
Telecopy No.: 803-748-3336
(ii) If to Assignee:
ITC Holding Company, Inc.
206 West 9th Street
West Point, GA 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, AL 35802
Attention: General Counsel
Telecopy No.: 205-650-3936
7. 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.
4
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have caused this Second Partial
Assignment and Assumption of Revised and Restated Fiber Optic Facilities and
Services Agreement to be executed as of the day and year first above written.
ASSIGNOR:
SCANA COMMUNICATIONS, INC.
By: /s/ K. B. Marsh
--------------------------------------
Name: K. B. Marsh
------------------------------
Title: V.P. & CFO
-----------------------------
ASSIGNEE:
ITC HOLDING COMPANY, INC.
By: /s/ Doug Shumate
--------------------------------------
Name: Doug Shumate
------------------------------
Title: Vice President
-----------------------------
<PAGE>
SCHEDULE 1
----------
TO SECOND PARTIAL ASSIGNMENT AND ASSUMPTION OF REVISED AND
----------------------------------------------------------
RESTATED FIBER OPTIC FACILITIES AND SERVICES AGREEMENT
------------------------------------------------------
<TABLE>
<CAPTION>
SUMMARY OF ROUTES
-----------------
Route Segment Route Miles # Fibers SES Exhibits #*
------------- ----------- -------- ---------------
<S> <C> <C> <C>
55 Park Place to Tap 15 16 Fibers Exhibit #D-6
Tap to Hartwell 85 10 Fibers Exhibit #D-7
55 Park Place to Morrow 15 12 Fibers Exhibit #D-9
Jonesboro to Morrow 7 10 Fibers Exhibit #D-10
</TABLE>
* Exhibit reference is to that certain Revised and Restated Fiber Optic
Facilities and Services Agreement between The Southern Electric System and MPX
Systems, Inc. (now known as SCANA Communications, Inc.), Dated as of June 9,
1995.
<PAGE>
Exhibit 10.20
- --------------------------------------------------------------------------------
FIBER SYSTEM
LEASE AGREEMENT
by and between
CSW COMMUNICATIONS, INC.
AND
GULF STATES FIBERNET,
A GEORGIA GENERAL PARTNERSHIP
- --------------------------------------------------------------------------------
<PAGE>
FIBER SYSTEM LEASE AGREEMENT
----------------------------
This Fiber System Lease Agreement (this "Agreement") dated this 30 day of
--
January, 1996, is made and entered into by and between CSW Communications, Inc.,
a Delaware corporation ("CSWC") and Gulf States FiberNet, a Georgia General
Partnership ("FiberNet").
RECITALS
--------
Central and South West Corporation ("CSW"), a Delaware corporation and a
registered holding company under the Public Utility Holding Company Act of 1935,
has express authority from the Securities and Exchange Commission (the "SEC")
for its wholly-owned subsidiary CSWC to construct and to lease out reserve
capacity of fiber optic telecommunications systems. CSWC has applied for
authorization from the SEC to build and lease a fiber optic system connecting
the cities of Shreveport, Louisiana and Longview, Texas (the "Primary Fiber
System"), and a spur in Shreveport, Louisiana (the "Shreveport Spur") as more
fully described in Section 3 of this Agreement (the "Fiber System"). Subject to
---------
such regulatory approval, CSWC desires to lease to FiberNet, and FiberNet
desires to lease from CSWC, a portion of the Fiber System, on the terms and
conditions set forth in this Agreement.
NOW THEREFORE, for and in consideration of the foregoing and of the mutual
covenants and agreements contained in this Agreement, the parties hereby agree
as follows:
Section 1. Certain Definitions. As used in this Agreement:
--------------------
"Acceptance Date" means the date upon which the Leased Fibers are accepted
by FiberNet in accordance with Section 5.
---------
"Acceptance Test" has the meaning set forth in Section 4.
---------
"Affiliate," with respect to any person, means any person that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with the person specified as a result of ownership of
more than 50 percent of the voting capital stock or other voting securities of
such person.
"Arbitrator" has the meaning set forth in Section 24.
----------
"Associate," with respect to any person, means any corporation or other
business organization of which such person is an officer or partner or is the
beneficial owner, directly or indirectly, of 10% or more of any class of equity
security, any trust or estate in which such person has a substantial beneficial
interest or as to which such person serves as a trustee or in a similar capacity
and any relative or spouse of such person, or any relative of such spouse, who
has the same home as such person.
1
<PAGE>
"Completion Date" means the date on which CSWC completes the construction
of the Fiber System.
"CSW" means Central and South West Corporation, a Delaware corporation.
"CSW Indemnified Parties" has the meaning set forth in Section 18(a).
-------------
"CSWC" means CSW Communications, Inc., a Delaware corporation and wholly-
owned subsidiary of CSW.
"Effective Date" has the meaning set forth in Section 2.
---------
"Event of Default" has the meaning set forth in Section 21.
----------
"FiberNet" means Gulf States FiberNet, a Georgia General Partnership.
"Fiber System" has the meaning set forth in the Recitals to this Agreement.
"Government Authority" means any court, tribunal, authority, agency,
commission, official or other instrumentality of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision.
"Holding Company Act" means the Public Utility Holding Company Act of 1935,
as amended.
"HVAC System" has the meaning set forth in Section 3.
---------
"FiberNet Indemnified Parties" has the meaning set forth in Section 18(b).
-------------
"Leased Fibers" means 20 of the fibers in the Primary Fiber System, the 8
fibers in the Shreveport Spur and the Regeneration Station.
"Longview Building" has the meaning set forth in Section 3. "PUCT" means
---------
the Public Utility Commission of Texas.
"PSCL" means the Public Service Commission of Louisiana.
"Regeneration Station" has the meaning set forth in Section 3. "Rent" has
---------
the meaning set forth in Section 8.
---------
"SEC" means the Securities and Exchange Commission.
2
<PAGE>
"Service Affecting Outage" means any interruption or reduction in use of
Leased Fibers in use by FiberNet that materially affects FiberNet's ability to
conduct its business on the Fiber System.
"Shreveport Building" has the meaning set forth in Section 3.
---------
"Shreveport Spur" has the meaning set forth in the Recitals to this
Agreement.
"Shreveport Spur Building" has the meaning set forth in Section 3.
---------
"SWEPCO" shall mean Southwestern Electric Power Company, a Delaware
corporation and wholly-owned subsidiary of CSW.
"Term" has the meaning set forth in Section 7.
---------
Section 2. Condition Precedent. All obligations of the parties hereto are
-------------------
subject to, and conditioned on, the receipt of all governmental and regulatory
approvals required for the execution, delivery and performance of this
Agreement, including, but not limited to, all required approvals of the SEC
under the Holding Company Act, all on terms and conditions reasonably acceptable
to CSWC and FiberNet. Each party agrees to use its reasonable best efforts to
obtain all such approvals applicable to its execution, delivery and performance
of this Agreement as promptly as reasonably practicable. The date on which such
condition is satisfied (or waived, as the case may be) is hereinafter referred
to as the "Effective Date."
Section 3. Construction of Fiber System. CSWC shall install or cause to
----------------------------
have installed the Fiber System, according to CSWC's specifications, which shall
include (i) 20 fibers and (ii) one regeneration station (the "Regeneration
Station") equipped with lighting, metered electric service, a heating,
ventilation and air conditioning system ("HVAC System") and secured access for
FiberNet. The Primary Fiber System shall originate at the entrance of the
building located at 724 McNeil, Shreveport, Louisiana (the "Shreveport
Building") and terminate at the entrance of the building located at 119 W. Tyler
Street, Longview, Texas (the "Longview Building"), a distance of approximately
68 miles, and the Shreveport Spur shall originate at the entrance of the
Shreveport Building and terminate at the entrance of the building located at 400
Travis Street, Shreveport, Louisiana (the "Shreveport Spur Building").
Section 4. Acceptance Test CSWC shall notify FiberNet of the Completion
---------- ----
Date. Promptly after receipt of such notice, CSWC and FiberNet shall jointly
conduct a test ("Acceptance Test") of the Fiber System to determine that the
Leased Fibers meet the specifications described in Exhibit "A" hereto. Within 10
----------
calendar days after completion of the Acceptance Test FiberNet shall give CSWC
written notice of any failure of the Leased Fibers to satisfy the Acceptance
Test. If, within such 10-day period, FiberNet gives CSWC written notice of any
failure of the Leased Fibers to satisfy the Acceptance Test, CSWC
3
<PAGE>
shall use its reasonable best efforts to promptly correct such failure,
whereupon FiberNet and CSWC shall jointly conduct another Acceptance Test. The
procedure set forth in this section shall be repeated until FiberNet accepts the
Leased Fibers pursuant to Section 5.
---------
Section 5. Acceptance by FiberNet. FiberNet shall be deemed to have
----------------------
accepted some or all of the Leased Fibers upon the first of the following to
occur:
(a) satisfaction of the Acceptance Test for some or all of the Leased
Fibers pursuant to Section 4;
---------
(b) FiberNet uses some or all of the Leased Fibers for any of the purposes
described in or permitted by Section 9;
---------
(c) FiberNet acknowledges acceptance of some or all of the Leased Fibers in
writing; or
(d) FiberNet fails to give CSWC written notice of any failure of the Leased
Fibers to satisfy any Acceptance Test on or before the tenth (10th) day after
completion of such Acceptance Test.
Section 6. Lease. CSWC shall lease to FiberNet, and FiberNet shall lease
-----
from CSWC, the Leased Fibers during the Term. Concurrently therewith, CSWC shall
grant to FiberNet a nonexclusive license for occupancy and use of the
Regeneration Station and related facilities.
Section 7. Term. The original term of this Agreement (the "Original
----
Term") shall commence on the Acceptance Date and end on the tenth anniversary of
the Acceptance Date. Subject to the requirements set forth herein, FiberNet
shall be entitled to renew the term of this Agreement for two additional periods
of five years each. Provided no Event of Default exists and unless FiberNet
elects not to extend and renew the term of this Agreement by giving written
notice or failing to give written notice as described hereinafter, the term of
this Agreement shall automatically be extended and renewed for an additional
period of five years (such renewal period is referred to as the "First Renewal
Term"), such First Renewal Term to begin immediately following expiration of the
Original Term. Provided no Event of Default exists and unless FiberNet elects
not to extend and renew the term of this Agreement by giving written notice or
failing to give written notice as described hereinafter, the term of this
Agreement shall automatically be extended and renewed for an additional period
of five years (such renewal period is referred to as the "Second Renewal Term";
collectively, the First Renewal Term and the Second Renewal Term are referred to
herein as the "Renewal Terms"), such Second Renewal Term to begin immediately
following expiration of the First Renewal Term. CSWC shall give FiberNet written
notice (the "CSWC Notice") at least 120 calendar days prior to the end of the
Original Term or First Renewal Term, as the case may be, requesting FiberNet to
give notice to CSWC of its election to, or not to, extend and renew the Term of
this Agreement.
4
<PAGE>
FiberNet shall give CSWC written notice of its election within 30 calendar days
after receipt of the CSWC Notice. If FiberNet does not give CSWC the required
written notice within such 30-day period, FiberNet shall be deemed to have
elected to extend and renew the Term of this Agreement. The Original Term and
any Renewal Terms are collectively referred to herein as the "Term"
Section 8. Rent.
----
(a) Securit Deposit. FiberNet shall pay CSWC a security deposit equal
---------------
to $51,680 on the date hereof, which deposit shall be applied to the first
month's Rent of the Original Term.
(b) Rent. Commencing on the Acceptance Date, FiberNet shall pay to CSWC
----
rent ("Rent") (i) for the Original Term and the First Renewal Term (if FiberNet
renews the term of this Agreement) equal to $38.00 per fiber, per month, per
route mile on the Primary Fiber System and (ii) for the Second Renewal Term (if
FiberNet renews the term of this Agreement) equal to $29.00 per fiber, per
month, per route mile on the Primary Fiber System, on the first day of the month
in which it is due, at the address specified in Section 26, in lawful money of
----------
the United States by check or draft; provided, however, that no Rent shall be
-------- -------
due and payable until the Effective Date, at which time all prior due and
unpaid Rent for the period from the Acceptance Date to the Effective Date shall
be immediately due and payable. If the Acceptance Date or the commencement date
for any Renewal Term is other than the first day of a calendar month, or the
termination date of this Agreement is other than the last day of a calendar
month, the Rent to be paid for such partial month shall be prorated by days
based on a 30-day month.
(c) Interest. Rent shall become overdue if not paid within 30 days after
--------
the date on which it became due ("Overdue Rent"). Overdue Rent shall begin to
accrue interest daily beginning on the 31st day after it became due until paid
at an annual rate equal to the prime rate of interest published in the Wall
Street Journal, as the same shall be published on the day on which the Overdue
Rent begins to accrue interest (or, if the prime rate of interest is not
published on such date, the next business day thereafter on which the prime rate
of interest is published in the Wall Street Journal), plus three percent.
(d) No Setoff. The obligation to pay Rent is independent of any other
---------
covenant or obligation in this Agreement. FiberNet shall not be entitled to any
setoff or counterclaim against the payments owed hereunder for any act or
omission of CSWC, or on account of any claim FiberNet may have against CSWC,
unless agreed to by CSWC in writing.
Section 9. Use of Leased Fibers. FiberNet shall be entitled to use the
--------------------
Leased Fibers for any lawful purpose, including for the purpose of subleasing or
providing telecommunications services to other persons.
5
<PAGE>
Section 10. Title. Title to the Leased Fibers shall at all times remain
-----
with CSWC exclusively.
Section 11. Access to Regeneration Station. CSWC shall provide FiberNet
------------------------------
with access to the Regeneration Station for (a) installation and maintenance of
FiberNet's electronic and power equipment required for FiberNet's use of the
Leased Fibers; (b) conducting the Acceptance Test and the correction of any
failures to satisfy the Acceptance Test pursuant to Section 4; (c) any
---------
inspection, test, repair, replacement, operation or other activities involving
or affecting FiberNet's use of the Leased Fibers; and (d) the removal of
FiberNet's electronic and power equipment after the expiration of the Term or
upon earlier termination of this Agreement or FiberNet's right of possession as
provided in Section 23 hereto.
----------
Section 12. Obligations of CSWC.
-------------------
(a) Maintenance. CSWC shall be responsible, at its sole cost and expense,
-----------
for the operation, maintenance and repair of the physical components of the
Fiber System, including the fibers and the building, property and HVAC System of
the Regeneration Station, up to the demarcation point at the entrance of the
Shreveport Building, the Shreveport Spur Building and the Longview Building.
Without limiting the generality of the foregoing, CSWC shall comply with the
maintenance standards and be responsible for the maintenance procedures set
forth on Exhibit "B" hereto.
----------
(b) Propertv Taxes. CSWC shall be responsible for the cost of all property
--------------
taxes attributable to the Fiber System.
(c) Easement or Right-of-Way Rights. CSWC shall be responsible at its own
-------------------------------
expense for the acquisition of any easement or right-of-way rights that may be
required in order to permit the installation, operation and maintenance of the
Fiber System and the use of the Fiber System by FiberNet within such corridor.
FiberNet shall be responsible for obtaining easements and rights-of-way for any
equipment it intends to install outside CSWC's corridor.
Section 13. Obligations of FiberNet.
-----------------------
(a) Expenses. FiberNet shall be responsible for a pro rata share of (A)
--------
electric power service and (B) any securities services, with respect to the
Leased Fibers. CSWC shall submit an invoice to FiberNet, in accordance with
Section 26, for such expenses, the amount of which FiberNet shall pay within 30
- ----------
days after the invoice date. Overdue amounts shall accrue interest daily until
paid at an annual rate equal to the prime rate of interest published in the Wall
Street Journal, as the same shall be published on the thirtieth day after the
invoice date (or, if the prime rate of interest is not published on such date,
the next business day thereafter on which the prime rate of interest is
published), plus three percent. FiberNet shall not be responsible for any costs
and expenses incurred by CSWC
6
<PAGE>
in connection with the Fiber System, including, but not limited to, the re-
routing of the Fiber System (if CSWC, in its discretion, ever deems re-routing
the Fiber System to be necessary or appropriate), except as expressly provided
in this Agreement or as otherwise agreed to by and between CSWC and FiberNet.
(b) Equipment. FiberNet shall be responsible for, and shall bear all
---------
costs associated with, the furnishing, installation, testing, operation, use,
maintenance, repair, replacement and other aspects of all electronics,
communications and other equipment, facilities and items required for FiberNet's
interconnection with or use of the Leased Fibers, including electronic power
equipment and electronic power backup equipment at the Regeneration Station and
equipment, offices and facilities for the Shreveport Building, the Shreveport
Spur Building and the Longview Building.
(c) Regulatory Compliance. FiberNet shall, at its sole expense, make all
---------------------
required filings and registration with, and shall obtain all required permits,
licenses, approvals, certificates, franchises, consents and authorizations from,
the Federal Communications Commission, PUCT, PSCL and each other applicable
Governmental Authority in connection with its use of the Leased Fibers, and
shall at all times hold, operate and use the Leased Fibers in accordance with
all applicable federal, state, local and foreign laws, statutes, rules
regulations, ordinances and orders.
Section 14. Right to Purchase Capacity. Each of CSW, CSWC and their
--------------------------
Affiliates, in its sole discretion, shall have the right, at any time, to
purchase capacity on the Fiber System from FiberNet, and FiberNet, upon written
notice, shall be unconditionally obligated to sell such capacity to any of CSW,
CSWC or their Affiliates at a rate to be determined as described herein.
Notwithstanding the prior sentence, FiberNet shall only be obligated to make
available for purchase by CSW, CSWC and their Affilates, at the rate determined
as described herein, capacity up to an aggregate of 3 DS3s plus, to the extent
that FiberNet has available capacity, any additional DS3s that any of CSW, CSWC
or their Affiliates desire to purchase. The rates that CSW, CSWC or their
Affiliates shall be obligated to pay are the following: (a) a DS3 at $.04 per
DSO, per V&H mile, per month; and (b) a DS1 at $.08 per DSO, per V&H mile, per
month; provided, however, that such rates shall be decreased (but not increased)
-------- -------
based on the percent decrease, if any, in market prices from the date hereof to
the date on which written notice of intent to purchase capacity from FiberNet on
the Fiber System is received by FiberNet. Each of CSW, CSWC and their Affiliates
shall also have the right to resell the purchased capacity to its Affiliates at
cost.
Section 15. Noncompetition Agreement. Except as provided in Section 15,
------------------------ ----------
CSWC hereby agrees that, for a period ending on the earlier to occur of the
fourth anniversary date of this Agreement or the termination of this Agreement,
CSWC shall not offer common carrier services on the Fiber System in competition
with FiberNet.
7
<PAGE>
Section 16. Interruption of Use.
-------------------
(a) Except as provided in clause (b) herein, CSWC shall not be liable to
FiberNet for any interruption or reduction in the use of the Leased Fibers by
FiberNet or any other person caused, in whole or in part, by:
(i) acts of God or any other cause or force beyond the control of
CSWC, including but not limited to, flood, earthquake, storm, lightning,
fire, strike, epidemic, war, riot, civil disturbance, labor disturbance,
sabotage, power outages, accidents, explosions, shortages of equipment or
supplies, or unavailability of transportation; or
(ii) construction, maintenance, repairs, replacements, installation
of equipment, investigations and inspections, of or on the Fiber System
performed (A) by or at the direction of FiberNet or (B) to the extent
reasonably necessary, by or on behalf of CSWC or SWEPCO; provided, however,
-------- -------
that CSWC shall (or shall cause SWEPCO to) inform SWEPCO line crews
periodically of the location of, and shall use its reasonable best efforts
to cause such crews to avoid damage to, the Leased Fibers.
(b) Notwithstanding clause (a), CSWC shall use its reasonable best
efforts to restore or assist in restoring FiberNet's use of the Fiber System as
promptly as practicable. Without limiting the effect or generality of the
foregoing, if the interruption or reduction in use is a Service Affecting
Outage, CSWC will use its reasonable best efforts to restore FiberNet's use of
the Fiber System within 18 hours after receipt of notice from FiberNet of the
Service Affecting Outage. If FiberNet's use of the Fiber System is not restored
within such 18-hour period, (A) FiberNet shall be entitled to one month of free
Rent, (B) FiberNet shall have the right to restore its use of the Fiber System
and (C) CSWC shall reimburse FiberNet for 200% of the direct labor costs and
150% of the cost of materials and supplies incurred by FiberNet for such
restoration.
(c) In addition, each party shall use its reasonable best efforts to give
the other party reasonable advance notice of work that may cause an interruption
or reduction in the other party's use of its portion of the Fiber System and, in
the event of such interruption or reduction, to restore the other party's use of
such portion of the Fiber System as promptly as practicable. Except to the
extent such action is delayed by an event set forth in clause (a)(i) or (a)(ii)
above, all maintenance, repairs, replacements, installation of equipment,
investigations and/or inspections shall be performed in accordance with a
mutually agreed-upon schedule, so as to minimize inconvenience to both parties
hereto.
8
<PAGE>
(d) FiberNet hereby agrees to provide (i) written or verbal notice to
CSWC of the number of Leased Fibers in use by FiberNet within 5 business days
after some or all of the Leased Fibers are first placed in use and (ii) written
or verbal notice of any subsequent change in the number of Leased Fibers in use
by FiberNet within 5 business days after any such change.
Section 17. Consequential Damages.
---------------------
(a) Notwithstanding any other provision of this Agreement, in no event
shall CSWC be responsible to FiberNet or any other person, nor shall FiberNet be
responsible to CSWC or any other person, directly or indirectly, by
indemnification or otherwise, for incidental or consequential damages, including
loss of revenue or profits, resulting from any breach of this Agreement or any
interruption, reduction or cessation in the use of the Leased Fibers.
(b) Neither party shall enter into any lease, sublease, license,
contract, agreement, arrangement or understanding with any person relating to
the use of the Leased Fibers or any portion thereof unless such lease, sublease,
license, contract, agreement, arrangement or understanding shall provide that
the other party shall not be responsible, directly or indirectly, by
indemnification or otherwise, to any such person for incidental or consequential
damages, including loss of revenue or profits, resulting from any breach thereof
or any interruption, reduction or cessation in the use of the Leased Fibers
resulting therefrom.
Section 18. Indemnification.
---------------
(a) Subject to the limitations set forth in Section 17 of this Agreement,
----------
FiberNet shall indemnify and save harmless and defend CSW, CSWC and the
employees, officers, directors, corporate shareholders and Affiliates of each
of them (the "CSW Indemnified Parties") from any and all liabilities, damages,
obligations, claims, costs and expenses, including reasonable attorneys' fees
and expenses, incurred by or asserted against such CSW Indemnified Parties by
reason of:
(i) any work on or near the Fiber System (or in transit to or from
such work) by or at the direction of FiberNet or employees, agents or
contractors of FiberNet in connecting the Fiber System or any portion
thereof to facilities of FiberNet or any sublessee or other user of the
Leased Fibers;
(ii) any use, nonuse, possession, occupation, condition, operation,
maintenance or management of the Leased Fibers, or any portion thereof, by
FiberNet or employees, agents or contractors of FiberNet, or for which any
of FiberNet or employees, agents or contractors of FiberNet is responsible;
9
<PAGE>
(iii) any negligent or tortious act of FiberNet or any of its
employees, agents, contractors, licensees or invitees; or
(iv) any failure by FiberNet to perform any of its material
obligations under this Agreement.
(b) Subject to the limitations set forth in Sections 16 and 17 of this
------------------
Agreement, CSWC shall indemnify and save harmless and defend FiberNet and its
employees, officers, directors, corporate shareholders, partners and Affiliates
(the "FiberNet Indemnified Parties") from any and all liabilities, damages,
obligations, claims, costs and expenses, including reasonable attorneys' fees
and expenses, incurred by or asserted against such FiberNet Indemnified Parties
by reason of:
(i) any work on or near the Fiber System by or at the direction of
CSWC, SWEPCO, or employees, agents or contractors of CSWC or SWEPCO (other
than FiberNet and its employees, agents, contractors, Affiliates and
Associates to the extent any of them may be deemed to be an employee, agent
or contractor, or to be acting at the direction, of CSWC or SWEPCO) in
connecting any portion of the Fiber System other than the Leased Fibers to
facilities of CSWC or any lessee or other user of such portion of the Fiber
System;
(ii) any use, nonuse, possession, occupation, condition, operation,
maintenance or management of any portion of the Fiber System by CSWC or
SWEPCO or employees, agents or contractors of CSWC or SWEPCO (other than
FiberNet and its employees, agents, contractors, Affiliates and Associates
to the extent any of them may be deemed to be an employee, agent or
contractor, or to be acting at the direction, of CSWC or SWEPCO) or for
which any of them is responsible;
(iii) any negligent or tortious act of CSWC or any of its employees,
agents, contractors, licensees or invitees (other than FiberNet and its
Affiliates and Associates); or
(iv) any failure by CSWC to perform any of its obligations under
this Agreement.
(c) Notwithstanding any other provision of this Agreement, the obligations
of FiberNet under Section 18(a) and of CSWC under Section 18(b) shall survive
------------- -------------
the expiration or termination of this Agreement or the earlier termination of
FiberNet's right of possession or use of the Leased Fibers. Nothing in Section
-------
18(a) or Section 18(b) shall be construed to require CSWC to indemnify any
- ----- -------------
FiberNet Indemnified Party, or FiberNet to indemnify any CSW Indemnified Party,
for any liabilities, damages, obligations, claims, costs or expenses incurred by
or asserted against such indemnified party by reason of negligence or other
tortious conduct of such indemnified party or failure by any such indemnified
party which is a party to this Agreement to perform its obligations under this
Agreement.
10
<PAGE>
Section 19. Insurance. Promptly after the Effective Date, FiberNet shall
---------
present to CSWC certificates of insurance, reasonably acceptable to CSWC,
evidencing the following insurance coverage:
(a) worker's compensation insurance coverage complying with the law of
the States of Texas and Louisiana and employers liability insurance with limits
of not less than $500,000 per occurrence;
(b) comprehensive general liability insurance coverage, with broad form
endorsement attached, for a combined bodily injury and property damage limit of
not less than $1,000,000 per occurrence, which coverage shall include blanket
contractual, products and completed operations liability coverage;
(c) comprehensive automobile liability insurance coverage, with a
combined bodily injury and property damage limit of not less than $1,000,000
per occurrence, which coverage shall include all owned, non-owned and hired
vehicles; and
(d) umbrella liability insurance coverage applying in excess of the
limits set forth in clauses (a) through (c) above, subject to a limit of not
less than $1,000,000.
All such coverage shall provide for not less than 30 days' prior written notice
of cancellation or material change. FiberNet shall maintain all such coverage in
force at all times during the term of this Agreement. All such policies of
insurance (other than policies with respect to the insurance coverage set forth
in clause (a) above) shall include CSW, CSWC and SWEPCO as additional insureds
with respect to the activities of FiberNet.
Section 20. Termination.
-----------
(a) Events of Termination. This Agreement and the lease created hereby
---------------------
may be terminated and abandoned:
(i) upon the mutual written agreement of FiberNet and CSWC;
(ii) by either party, upon written notice to the other, in the event
that an injunction or other final order or judgment is entered in any
lawsuit or regulatory proceeding restraining CSWC's performance under this
Agreement, declaring or otherwise rendering CSWC's performance unlawful or
compelling removal, discontinuation or divesture of all or part of the
Fiber System, and such injunction, order or judgment has not been vacated,
reversed or stayed within 30 days from the date of entry thereof;
(iii) by FiberNet if the Completion Date is after December 31, 1996;
or
11
<PAGE>
(iv) by either party if any of the transactions contemplated by this
Agreement are finally disapproved of by any Government Authority whose
approval is required to consummate such transactions.
(b) Notice. The power of termination provided for in this Section 20 may
------ ----------
be exercised only by written notice signed by the party exercising such power
forwarded to the other party in accordance with the terms of Section 26.
----------
(c) Effect of Termination. Upon the occurrence of an event of
---------------------
termination set forth in Section 20(a), 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 obligations of the parties under Section 18
-------- ------- ----------
of this Agreement, and the obligations of FiberNet to pay Rent accrued through
the effective date of such termination, shall remain in full force and effect,
and no termination pursuant to this Section 20 shall entitle FiberNet to the
----------
return of any Rent theretofore paid or afford to FiberNet any defense to the
payment of Rent then due and payable;
Section 21. Default.
-------
(a) Default.
-------
(i) An event of default ("Event of Default") by FiberNet shall exist
if any one or more of the following events shall occur and be continuing:
(A) FiberNet shall admit in writing its inability to pay its
debts as such debts become due;
(B) FiberNet 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 seeking to take advantage of any other 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;
(C) a proceeding or case shall be commenced, without the
application or consent of FiberNet, 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,
12
<PAGE>
receiver, custodian, liquidator or the like of FiberNet or of all or any
substantial part of its assets, or (3) similar relief in respect of
FiberNet under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, which is not dismissed
within 90 days thereafter;
(D) FiberNet shall fail to perform any material obligation under
this Agreement (other than the obligation to pay Rent) and such failure
shall continue for a period of 30 days following written notice from CSWC
to FiberNet specifying such nonperformance, provided that if such failure
cannot be cured within such 30-day period with the exercise of reasonable
due diligence, CSWC shall grant a reasonable additional period of time in
which to cure such failure;
(E) FiberNet shall fail or refuse to remit to CSWC within sixty (60)
days following the due date thereof, any Rent then due and payable; or
(F) except as provided in Section 9 hereof, FiberNet shall cause or
---------
permit the encumbrance of all or any part of its interest in this Agreement
or the Leased Fibers, without the prior written consent of CSWC; provided
--------
that nothing herein shall be construed to require CSWC to give consent to
such encumbrance or to prevent CSWC from withholding its consent to such
encumbrance for any or no reason.
(ii) An Event of Default by CSWC shall exist if any one or more of the
following events shall occur and be continuing:
(A) CSWC 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 seeking
to take advantage of any other 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;
(B) a proceeding or case shall be commenced, without the application
or consent of CSWC, 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 CSWC or of all or any substantial part
of its assets, or (3) similar relief in respect of CSWC under any law
13
<PAGE>
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, which is not dismissed within 90 days
thereafter;
(C) CSWC shall fail to perform any material obligation under this
Agreement (other than restoring use by FiberNet of the Leased Fibers as
provided in Section 16 of this Agreement) and such failure shall continue
----------
for a period of 30 days following written notice from FiberNet to CSWC
specifying such nonperformance, provided that if such failure cannot be
cured within such 30-day period with the exercise of reasonable due
diligence, FiberNet shall grant a reasonable additional period of time in
which to cure such failure; or
(D) an interruption or reduction in the use or quantity of the
Leased Fibers by FiberNet that continues for a period of 30 days following
written notice from FiberNet to CSWC of the interruption or reduction in
use, provided that if use of the Leased Fibers is not restored within such
30-day period with the exercise of reasonable due diligence, FiberNet shall
grant a reasonable additional period of time in which to restore use of the
Leased Fibers.
(b) Rights Upon Default.
-------------------
(i) Upon the occurrence of an Event of Default by FiberNet, subject to
the provisions of Section 22 below, CSWC shall be entitled to immediate and
----------
exclusive possession, use and control of the Leased Fibers and may forthwith
terminate this Agreement by written notice to FiberNet. Upon the occurrence of
an Event of Default, FiberNet's right to possession and use of the Leased Fibers
shall terminate and (i) CSWC shall have the right to repossess the Leased Fibers
by any lawful means, without demand or notice of any kind to FiberNet, except as
may be required by law, and without terminating this Agreement or the lease
created hereby, (ii) CSWC shall have the right to, subject to all required
approvals of the SEC or any other Governmental Authority and any limitations
imposed thereby, relet the Leased Fibers for the account and risk of FiberNet,
for such rent and upon such other terms and conditions as CSWC shall determine
in its sole discretion, and (iii) subject to the provisions of Sections 22 and
---------------
23 below, the net present value (using an annual discount rate equal to 12
- --
percent) of all unpaid Rent (the "Unpaid Rent") for the Original Term (or the
Renewal Term if the Term of this Agreement has been renewed and extended) shall
become immediately due and payable, and CSWC shall have the right to recover as
damages from FiberNet the Unpaid Rent, plus collection costs, including
reasonable attorney's fees and court costs.
(ii) Upon the occurrence of an Event of Default by CSWC, subject to the
provisions of Section 22 below, FiberNet shall be entitled to terminate this
----------
Agreement by written notice to CSWC.
14
<PAGE>
Section 22. Remedies. CSWC and FiberNet 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 CSWC or FiberNet, as the case may
be. Except as otherwise provided by law, no repossession of the Leased Fibers by
CSWC shall be construed as an election by CSWC to terminate this Agreement
unless a written notice of such intention is given by CSWC to FiberNet pursuant
to Section 26; and no receipt of monies by CSWC from FiberNet shall reinstate
----------
this Agreement or FiberNet's right of possession. All remedies provided in this
Agreement are cumulative and not 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 therefor may arise.
Section 23. Expiration: Surrender. Within 15 calendar days after the
---------------------
expiration of the Term as provided in Section 7 or within 15 calendar days after
---------
earlier termination of this Agreement or FiberNet's right of possession,
FiberNet shall remove its personal property, equipment and trade fixtures,
perform all restoration made necessary by the removal of such items, and
peacefully yield up the Leased Fibers to CSWC in good order, repair and
condition, except to the extent that the order, repair and condition of the
Leased Fibers are not FiberNet's obligation. If FiberNet fails or refuses to
remove any of its personal property, equipment and trade fixtures, FiberNet
shall be conclusively presumed to have abandoned the same, and title shall
thereupon pass to CSWC without setoff, credit, allowance or other cost to CSWC,
and CSWC may, at its sole option, accept title to such property by written
notice thereof to FiberNet or, at FiberNet's expense, may remove the same or any
part thereof in any manner CSWC may choose, and store, destroy or otherwise
dispose of the same without incurring any liability to FiberNet or any other
person. Except as specified in Section 7, no notice shall be required from
---------
either party to terminate the lease created by this Agreement upon the
expiration of the Term as provided in Section 7.
---------
Section 24. Disputes. If either party disagrees with the other's
--------
calculation, or the reasonableness, of any amount hereunder, the objecting party
shall provide the non-objecting party with notice of such disagreement together
with a revised calculation of the amount in question. If the non-objecting party
disagrees with such revised calculation, the parties shall have 30 days in which
to resolve the dispute. Failing such resolution, the parties shall thereupon
submit such dispute to a nationally recognized accounting firm mutually agreed
upon by CSWC and FiberNet or, failing agreement thereon, to Arthur Andersen LLP
(the "Arbitrator'). FiberNet and CSWC shall provide the Arbitrator with all
information required by the Arbitrator to make its determination. The Arbitrator
shall review all aspects of the dispute and shall deliver its determination to
the parties in the manner set forth in Section 26 as soon as possible and in any
----------
event not later than 30 days after submission of the dispute. The Arbitrator's
determination shall be final and binding on the parties. If the Arbitrator
determines that an additional sum is due, the party from which such sum is due
shall pay such sum, together with interest thereon at an annual rate equal to
the prime rate of interest published in the Wall Street Journal, as the same
shall be published from time to time, plus three percent, within 10 days after
the Arbitrator's
15
<PAGE>
determination. The fees and expenses of the Arbitrator shall be borne by the
parties in proportion to the relative variance of their positions from the
Arbitrator's determination.
Section 25. Subordination. FiberNet acknowledges and agrees that the lease
-------------
created by this Agreement is and shall be subject and subordinate to all
mortgages which may now or hereafter affect the Fiber System, all permits,
licenses, rights-of-way and easements covering the route of the Fiber System,
and all leases and subleases covering the Regeneration Station and points of
presence in the Fiber System, and shall execute such instruments as may
reasonably be requested to confirm such subordination. CSWC hereby agrees to
give written notice to FiberNet of any claim to the Fiber System that affects
the right or ability of FiberNet to use the Leased Fibers as contemplated
herein. If, as a result of any such claim, FiberNet must abandon use of the
Leased Fibers within 9 months after receipt of such notice, CSWC hereby agrees
to pay FiberNet an amount equal to the product of the Rent multiplied by the
number of months by which the period of notice of any such claim that was
provided to FiberNet by CSWC is less than 9 months.
Section 26. Notices. Any written notice, demand or request required or
-------
authorized by this Agreement shall be deemed properly given if delivered by
certified mail, return receipt requested, or by hand or overnight courier, with
delivery acknowledged, as follows:
(a) if to CSWC, to:
CSW Communications, Inc.
Attention: Mr. William Morrow
1705 Capital of Texas Highway South
Suite 400
Austin, Texas 78746
Fax: (512) 306-5881
(b) if to FiberNet, to:
Gulf States FiberNet, a Georgia General Partnership
Attention: Douglas A. Shumate, CPA
206 West 9th Street
West Point, GA 31833
Fax: (706) 645-8989
provided, that emergency notices of impairments in service may be given by
- --------
telephone by CSWC to the person designated by FiberNet, and by FiberNet to the
person designated by CSWC. All such telephone notices shall be confirmed in
writing. The designation of the person to be notified, or the address or
telephone number of such person, may be changed at any time, and from time to
time, by notice in accordance with this Section 26.
----------
16
<PAGE>
Section 27. Assignment; Parties in Interest. This Agreement shall be
-------------------------------
binding upon and inure solely to the benefit of the parties hereto and their
successors, legal representatives and assigns, but is not assignable in whole or
in part by either party without the prior written consent of the other party,
which consent shall not be unreasonably withheld. Except as expressly provided
in Section 18, nothing in this Agreement, express or implied, is intended to
----------
confer upon any person not a party hereto any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 28. Entire Agreement; Amendment. This Agreement constitutes the
---------------------------
entire Agreement between the parties hereto with respect to the use by FiberNet
of the Fiber System and cancels and supersedes all prior agreements, proposals,
negotiations, representations, discussions, and correspondence, either written
or oral, with respect to the subject matter hereof. No alterations, changes or
amendments to this Agreement shall be effective unless in writing and signed by
both parties hereto.
Section 29. Waiver. No waiver of a breach of any provision of this
------
Agreement shall constitute a waiver of any other breach or of the future
performance of such provision.
Section 30. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD FOR
THE PROVISIONS THEREOF REGARDING CHOICE OF LAW. ANY ACTION TO ENFORCE THIS
AGREEMENT SHALL BE BROUGHT IN THE STATE OF TEXAS.
Section 31. Severability. If any one or more of the provisions contained
------------
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein unless any party would thereby be deprived of material benefit.
Section 32. NO WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH HEREIN, CSWC
-------------
MAKES NO WARRANTY OF ANY KIND WHATSOEVER CONCERNING THE FIBER SYSTEM OR THE
LEASED FIBERS. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY CSWC AND ARE EXCLUDED FROM THIS
AGREEMENT.
Section 33. No Brokers. Each party represents and warrants to the other
----------
that no broker or finder is entitled to any brokerage, finder's or other fee or
commission in connection with this Agreement and the transactions contemplated
hereby based upon arrangements made by or on behalf of such party.
17
<PAGE>
Section 34. Interpretation. Unless otherwise explicitly stated, all
--------------
references to sections or subsection refer to sections or subsections of this
Agreement. The terms "hereof", "hereto", and "hereby" and terms of similar
import refer to this Agreement. Whenever the words "include", "includes", or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Section, subsection, and other headings are for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
Section 35. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CSW COMMUNICATIONS, INC.
By: /s/ Lawrence E. De Simone
----------------------------------------------
Name: Lawrence E. De Simone
Title: President
By: /s/ William E. Morrow
----------------------------------------------
Name: William E. Morrow
Title: Managing Director
GULF STATES FIBERNET,
A GEORGIA GENERAL PARTNERSHIP
By: /s/ Doug Shumate
----------------------------------------------
Name: Doug Shumate
Title: VP/CFO of Managing Partners
<PAGE>
EXHIBIT "A"
----------
Dark Fiber Specifications and Test Data Requirements
Executive Overview
- ------------------
The project will consist of obtaining dark fibers in a quantity to operate
a long haul fiber optic digital transmission system from Longview, Texas to
Shreveport, Louisiana. The route of the Primary Fiber System is approximately 68
cable miles and there will be one optical repeater site utilized at the midpoint
of this network. The fibers are to have less than 21.5 dB of attenuation from
optical transmitter to receiver in all sections measured from the equipment
receiver card. The fibers should be maintained to less than 23 dB for the life
of the cable. These transmitters and receivers will operate at the 1557 nm or
1533 wavelength. All testing and measurements should be accomplished at the 1550
wavelength window. All measurements will correct for instrumentation and
associated connections. All testing is contingent on FiberNet properly
terminating the end points of the Fiber System.
Technical Assumptions
- ---------------------
. Corning SMF-28 dual 1310/1550 window optical glass or equivalent
. One - 44.56 mile (71.87 kM) section
. One - 23.03 mile (37.15 kM) section
. 17 splice points per mod section
. FC/PC fiber connectors (less than -50 dB back reflection, less than
.50 dB insertion loss)
Calculations
- ------------
Maxium Attenuation per section = 21.51 dB =
(71.87M)(.25 dB/kM)+(l7splices)(.15 dB/splice) + 1 dB insertion loss
Maximum Dispersion per section = 1311 ps/nm =
[(18.25 ps/(nm)kM)(71.87kM)
Testing Documentation
- ---------------------
Present to FiberNet Network Engineering 10 working days before system activation
or 15 working days prior to customer service date.
1. End to End, bi-directional power meter readings on all leased fibers
MAXIMUM dB ALLOWED = 21.5 dB @ 1550 window.
2. End to End, bi-directional Optical Time Domain Reflectometer (OTDR) traces
on all leased fibers (paper or computer plot)
MAXIMUM dB ALLOWED per SPLICE POINT = .15 dB
A-1
<PAGE>
EXHIBIT "B"
----------
Maintenance Standards and Procedures
I. CSWC and FiberNET must operate in accordance with the Agreement.
II. CSWC and FiberNet hereby agree to perform the following functions:
A. FiberNet shall provide clear and reasonable guidelines, which will be
followed by CSWC for the requested services.
B. FiberNet shall provide CSWC with any required documentation,
materials, manufacturers recommended maintenance procedures and
access necessary for CSWC employees to perform the requested services
if required.
C. FiberNet will provide CSWC with copies of its operations manual
outlining the necessary maintenance guidelines for repair and
restoration of cable in the event of cable failure.
D. CSWC personnel shall be available for dispatching twenty-four hours a
day, seven days a week. CSWC will make reasonable efforts to have
qualified technicians available during this time.
E. CSWC shall provide FiberNet with reasonable documentation on all
services performed within a timely manner. CSWC's network operations
centers must keep FiberNet's network operations center or management
informed of progress being made.
F. All services must be coordinated through the network operations
centers.
B-1
<PAGE>
Guidelines for Preventive Maintenance
-------------------------------------
I. CSWC will perform 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 network operating centers.
B. All maintenance work will be recorded on the appropriate log sheets
located within the regeneration or terminal building in the log books.
C. All discrepancies will be noted and the network operating centers
notified for taking corrective action.
D. All technicians should be well qualified to perform any maintenance
function.
E. Housekeeping and Alarms:
1. Check filters in air conditioners.
2. Test air conditioners by switching and adjusting thermostats.
3. Check each commercial power phase and phase to phase for balancing
of load.
4. Check all lighting inside and outside.
5. Check wall type mounted fire extinguishers and record date.
6. Check cleanliness of building.
B-2
<PAGE>
ANNUAL PREVENTIVE MAINTENANCE
-----------------------------
I. During the annual preventive maintenance checks CSWC, FiberNet 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 regeneration or
terminal by reading with an OTDR doing traces and taking power
readings across each fiber (Transmit & Receive).
B. Grounding: Visually inspect all OPGW grounds at splice points.
C. Access: Check all access roads to splice points.
B-3
<PAGE>
Exhibit 10.21
CONSENT FOR ACQUISITION AND ASSIGNMENT
The undersigned hereby acknowledges notice of, and hereby consents to, (i) the
transaction in which ITC Holding Company, Inc. (and/or one or more subsidiaries
thereof) proposes to acquire from SCANA Communications, Inc. and/or affiliates
thereof (collectively, "SCANA") all of SCANA's partnership interests in Gulf
States FiberNet (a Georgia general partnership) and all of SCANA's fiber optic
network assets (including, without limitation, fiber optic cable and equipment)
relating to its Georgia fiber optic network, and (ii) the assignment and
transfer by Gulf States FiberNet to Gulf States Transmission Systems, Inc. of
all of Gulf States FiberNet's assets and liabilities (including, without
limitation, all rights, duties, and obligations under the Fiber System Lease
Agreement by and between CSW Communications, Inc. and Gulf States FiberNet dated
January 30, 1996) (the "Lease Agreement") provided that Gulf States Transmission
Systems, Inc. assumes and agrees to pay, perform and discharge all of Gulf
States FiberNet's duties and obligations under the Lease Agreement.
Date: 1-13-97 CSW COMMUNICATIONS, INC.
---------
By /s/ DON A SHOHON
-------------------
<PAGE>
Exhibit 10.22 MCI (Atlanta-Hartwell)
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC SERVICES AND FACILITIES
BETWEEN
SOUTHERNNET, INC.
AND
MPX Systems, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<C> <S> <C>
1. Services and Facilities Provided 2
2. Use of Capacity 6
3. Revenue Sharing 6
4. Term 11
5. Completion 12
6. Specifications; Testing 13
7. Restoration in the Event of Outages 15
8. Ownership of System. 16
9. Insurance 17
10. Condemnation and Casualty 17
11. Access and Security 18
12. Expenses 19
13. Confidentiality 19
14. Other Activities of Party 21
15. Compliance with Laws 21
16. Dispute Resolution 22
17. Representations and Warranties 23
18. Assignment 24
19. Amendment 24
20. Binding Effect; Limitation of Benefits 25
21. Notices 25
22. Severability 27
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
23. Independent Contractors 28
24. Exercise of Right 28
25. Additional Actions and Documents 29
26. Survival 29
27. Entire Agreement 29
28. Headings 29
29. Counterparts 30
</TABLE>
- ii -
<PAGE>
Definitions
-----------
Capacity -- Section 1.1
Carrier Level Purchasers -- Section 2
Completion Date -- Section 4
Confidential Information -- Section 13
Dispute -- Section 16
Dispute Committee -- Section 16
Original Term -- Section 4
Original Termination Date -- Section 4
Points of Presence -- Section 1.1
Renewal Term -- Section 4
Route -- Section 1.1
SouthernNet Space -- Section 1.4
System -- Section 1.1
System Carrier Revenue -- Section 3
Utility Company -- Recitals
<PAGE>
<TABLE>
<CAPTION>
Exhibits
--------
Exhibit Title Reference
- ------- ----- ---------
<S> <C> <C>
A Points of Presence, Completion 1.1, 1.2, 1.7
Dates
B Specifications 1.3, 6.1, 7
</TABLE>
<PAGE>
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC SERVICES AND FACILITIES
This Agreement, effective as of the 21st day of April, 1986 between
SouthernNet, Inc. a corporation organized and existing under the laws of the
State of Delaware, and SouthernNet of the Southeast, Inc., (collectively,
"SouthernNet"), and MPX Systems, Inc. ("MPX"), a corporation organized and
existing under the laws of the State of South Carolina, sets forth the terms and
conditions for the provision of certain telecommunications services as
hereinafter described.
WHEREAS, MPX has entered into an agreement with Southern Company
Services, Inc. ("SCS") for itself and as agent for Georgia Power Company (the
"Utility Company") pursuant to which MPX has obtained rights to place fiber
optic cable in the static wire as part of the electrical transmission operations
of the Utility Company, along certain transmission lines of the Utility Company,
utilizing which MPX shall operate a fiber optic transmission system in
conjunction with the Utility Company;
WHEREAS, MPX wishes to provide to SouthernNet the exclusive right to
all transmission capacity of such fiber optic transmission system, except for
certain transmission capacity to be retained by MPX as described herein, and
SouthernNet wishes to obtain such exclusive right to such transmission capacity,
on the terms and conditions set forth in this Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Services and Facilities Provided.
--------------------------------
1.1 MPX agrees to provide for the exclusive use by SouthernNet all of
the fiber optic capacity of MPX or that of associated or affiliated companies
(defined in the SCS agreement as "Additional Capacity"), installed on this
system from a border location at Hartwell, Georgia, to Atlanta, Georgia, and
from thence to Jonesboro, Georgia (the "Route"), and such other routes as from
time to time may be agreed upon by the parties. Such fiber optic capacity (the
"Capacity") shall consist of a 12 fiber optic telecommunications transmission
system including, without limitation, fiber optic cable and associated conduit,
cable repeaters, terminals, junctions, power sources, attachments, structures,
shelters and all other necessary and pertinent articles of property connected
with, necessary for or useful to the installation of a fiber optic transmission
system which shall be configured into a usable end-to-end system to be made
available to SouthernNet providing the Capacity from points of presence or
points of connection ("Points of Presence") of SouthernNet by certain dates, all
as specified on Exhibit A (the "System"). Each such Point of Presence shall be
---------
located at a site in the city or other geographic location specified on
Exhibit A.
- ---------
-2-
<PAGE>
1.2 The Capacity of the System to be provided to SouthernNet pursuant
to this Agreement shall consist of all fiber optic transmission capacity
constructed and operated for this system (Additional Capacity), except for such
fiber optic transmission capacity as is retained by the Utility Companies for
their internal telecommunications needs as specified in Exhibit A (defined in
---------
the SCS Agreement as the "Primary Capacity"). The Capacity shall on all
portions of the System consist of not less than the minimum number of fibers
and/or associated electronics as set forth in Exhibit A. Except as set forth
----------
herein, MPX shall not be entitled to permit any other person or entity to
utilize any portion of the Capacity of the System.
1.3 Without limiting the foregoing, MPX shall provide all optical
electronic (optronics) equipment, power supply and battery reserve, and
electrical terminal devices (M13 multiplexers) as necessary to convert
transmissions at each Point of Presence to the DSXl and DSX3 cross connect
level, as appropriate, in accordance with the specifications set forth in
Exhibit B.
- ----------
-3-
<PAGE>
1.4 At each Point of Presence described in Exhibit A, in addition to
---------
providing the equipment specified in Section 1.3, MPX itself or through
agreement with Utility Company will provide floor space at a terminal location
of MPX for use by SouthernNet ("SouthernNet Space"), adequate to permit
SouthernNet to install its digital access, cross connect and other equipment.
Such space shall generally be adequate for up to ten (10) racks of equipment,
each no larger than 24"W X 24"D X 84"H. Unless previously specified,
SouthernNet floor space will comply with power, ground, physical and
environmental requirements outlined in Bell Core Technical Publication 51001.
Such SouthernNet Space shall be used by SouthernNet to house equipment necessary
to permit SouthernNet to provide communications services to its customers and to
interconnect with the local exchange carriers. At each such SouthernNet Space,
MPX, itself or through agreement with Utility Company shall provide any such
easements and other rights of way necessary to permit SouthernNet to install
cables to exit the MPX site of the SouthernNet Space and to provide full access
by SouthernNet and its employees and agents to the SouthernNet Space.
-4-
<PAGE>
1.5 In connection with providing the System, MPX will test all splices
or cause all splices to be tested in the field, provide SouthernNet with
installed transmission parameters of the cable such as end-to-end loss, and
provide end-to-end maintenance and restoral services, including continual
network monitoring, fault location, splicing and splice testing associated with
any restoration, replacement cable used in any restoration, and maintenance and
replacement of repeater and terminal equipment as required. Notwithstanding any
other provisions of this Agreement, the maintenance and repair standards for
the System shall be at least as high as those standards utilized by MPX for the
maintenance and repair of its own internal communications systems. SouthernNet,
at its own cost, will be maintaining a network management system which will
monitor all transmission capacity being provided by SouthernNet, including such
transmission capacity being provided utilizing the System under this Agreement.
MPX will advise promptly, or will cause the Utility Companies to advise promptly
the SouthernNet network monitoring center of any material problems identified on
the System, and the SouthernNet network monitoring center shall be entitled to
notify MPX of any material problems on the System which such center identifies.
1.6 MPX, at its sole risk, cost and expense, shall furnish all
materials and shall bear the capital and operating expense associated with the
placement and maintenance of the fiber optic cable and electronics utilized in
creating the System and with providing the Capacity, and all taxes relating
thereto.
-5-
<PAGE>
2. Use of Capacity. The Capacity to which SouthernNet is given the
---------------
exclusive right pursuant to this Agreement shall be utilized by SouthernNet
solely for providing telecommunications capacity to Carrier Level Purchasers of
such capacity. "Carrier Level Purchasers" shall mean purchasers which are
registered or certified telecommunications carriers and which acquire fiber
optic transmission capacity only at the DS-l or DS-3 level (and not at the voice
frequency level or as a switched service). For purposes of this Agreement,
SouthernNet and its affiliates may be Carrier Level Purchasers so long as the
terms under which SouthernNet or its affiliates acquire capacity are not more
favorable to SouthernNet or such affiliates than the most favorable terms
offered by SouthernNet for such capacity to any other Carrier Level Purchaser.
3. Revenue Sharing.
---------------
3.1 As consideration for providing the Capacity and the System to
SouthernNet, MPX shall be entitled to receive 65% of the System Carrier Revenue
during the period commencing on the date of this Agreement and ending December
31, 1989, and 50% of the System Carrier Revenue commencing January 1, 1990, and
continuing until the end of the Term of this Agreement. For purposes of this
Agreement, "System Carrier Revenue" shall mean the revenues received by
SouthernNet from Carrier Level Purchasers for transmission capacity provided to
such Carrier Level Purchasers to the extent (but only to the extent) that such
transmission capacity is provided utilizing the System.
-6-
<PAGE>
If a Carrier Level purchaser purchases transmission capacity which is
provided solely utilizing the Capacity of the System, then all revenues received
from such Carrier Level Purchaser shall be System Carrier Revenue. If any
portion of the transmission capacity provided to the Carrier Level Purchaser is
provided on telecommunications facilities outside the System (including such
facilities provided by SouthernNet), then the portion of revenues received from
the Carrier Level Purchaser attributable to the System and considered System
Carrier Revenue shall be determined utilizing the "Logical Route Mile" method
calculation. Transmission capacity provided by SouthernNet without utilizing
the System shall not be subject to this Agreement.
Under the Logical Route Mile method of calculation the following
calculations will be made:
a. The points at which the transmission capacity provided by
SouthernNet (utilizing the System at least in part) for such Carrier
Level Purchaser originate (the "Origination Points") shall be
identified. The fiber optic transmission facilities between the
Origination Points are referred herein as the "Service Network."
-7-
<PAGE>
If SouthernNet is providing transmission capacity to a Carrier Level Customer
together with other providers having fiber optic transmission capacity outside
of the geographic coverage of SouthernNet (for example, members of National
Telecommunications Network), the transmission capacity of such other providers
shall be ignored and the revenues to be shared pursuant to this Agreement shall
consist only of those portions of the revenues paid by such a Carrier Level
Purchaser which are received by SouthernNet as a result of any allocation
arrangements or principles in effect with such other providers.
b. The points within the Service Network where the portion of the System
provided by MPX under this Agreement which is utilized in providing the
transmission capacity to the Carrier Level Purchaser connect with other
facilities utilized by SouthernNet in providing such transmission capacity shall
be identified, and are hereinafter referred as to as "Connecting Points."
-8-
<PAGE>
c. SouthernNet shall calculate the airline (V & H) mileages from:
(i) The initial Origination Point to the first Connecting Point.
(ii) The first Connecting Point to the second Connecting Point.
(iii) Said second Connecting Point to the terminating Origination Point.
These airline mileages will be deemed to be the respective "Logical Route Miles"
of each of the respective segments, regardless of the actual configuration of
the routes so measured or the actual ground miles of the fiber optic cable
utilized in such segments.
d. The Logical Route Miles thus assigned to each segment shall be totaled (the
"Total Logical Route Miles"). The System Carrier Revenues shall be equal to the
total revenues received by SouthernNet from or with respect to the Carrier Level
Purchaser multiplied by a fraction, the numerator of which shall be the Logical
Route Miles for the MPX Segment as calculated pursuant to subparagraph (ii)
above, and the denominator of which shall be the Total Logical Route Miles.
-9-
<PAGE>
3.2 SouthernNet shall pay MPX the amounts calculated pursuant to
Section 3.1 on a monthly basis. Within 3 working days after the end of each
calendar month, SouthernNet shall calculate all revenues received by SouthernNet
from Carrier Level Purchasers, and shall calculate the portion thereof payable
to MPX utilizing the calculation method described in Section 3.1. SouthernNet
shall send a statement to MPX setting forth such calculation and shall
simultaneously provide to MPX, in immediately available funds, the amount then
due MPX pursuant to such calculations. If SouthernNet fails to make any
required payment within 15 working days after the end of each calendar month,
then such overdue payment shall be subject to a late payment penalty equal to 1%
per month on the outstanding amount so overdue or such lesser amount as may be
permitted by applicable law.
3.3 The revenues with respect to which MPX shall be entitled to share
as described in this Section 3 shall be only those revenues which are generated
through the providing of DS-l and DS-3 level capacity. In the event that
SouthernNet or any affiliates of SouthernNet acquire such DS-l or DS-3 level
capacity on terms as described in Section 2 above, and resell capacity as a
switched service or at a voice frequency level, the revenues so received by
SouthernNet with respect to such voice frequency or other lower level capacity
shall not be subject to being shared by MPX, and only the payment by SouthernNet
or such affiliate as a Carrier Level Purchaser for the DS-l or DS-3 level
capacity which is subdivided shall be subject to such sharing. SouthernNet shall
have the exclusive right to set all rates for providing transmission capacity to
its customers.
-10-
<PAGE>
3.4 SouthernNet shall maintain full and complete books and records
relating to revenues received from Carrier Level Purchasers and all calculations
of amounts due to MPX pursuant to this Section 3. MPX, at its expense, shall be
entitled to review and copy such books and records during normal business hours
upon reasonable prior written notice to SouthernNet. All such books and records
shall be retained for a period of at least one year.
4. Term. The original term of this Agreement shall be a period of
----
twenty years (the "Original Term") commencing on the Completion Date (as defined
in Section 5) and ending on the last day of the calendar month in which occurs
the twentieth anniversary of the Completion Date (the "Original Termination
Date"). SouthernNet shall have the right and option, by giving written notice
as described below, to extend and renew the term of this Agreement for two
additional periods of ten years each (each such additional term referred to as a
"Renewal Term"), such Renewal Terms to begin immediately following expiration
of the Original Term, or the immediately preceding Renewal Term, as the case may
be, and to end respectively on the tenth and twentieth anniversaries of the
Original Termination Date. If SouthernNet desires to exercise one or more of
said options to renew the term of this Agreement, SouthernNet shall give MPX
written notice thereof at least twelve months prior to the commencement of the
Renewal Term with respect to which SouthernNet desires to exercise said option.
The Original Term and any Renewal Terms are collectively referred to herein as
the "Term".
-11-
<PAGE>
5. Completion.
----------
5.1 Upon completion of the System in accordance with Section 1 and
Section 6, MPX shall provide SouthernNet written notice of said completion,
together with copies of all tests of the System utilized to determine that the
System meets all applicable technical standards. Within thirty (30) days after
the date of such notice from MPX, SouthernNet shall notify MPX in writing
whether SouthernNet agrees that the System has been so completed, specifying any
incompleteness which SouthernNet has identified. When SouthernNet agrees that
the System has been completed, then the date of notice from SouthernNet to such
effect shall be deemed to be the "Completion Date".
5.2 The Capacity of the System may exceed the initial transmission
capacity required by SouthernNet. In such event, SouthernNet shall indicate to
MPX the capacity which is to be made operable upon completion of the System (or
any portion thereof). As subsequent needs of SouthernNet require the
commencement of operation of additional capacity, SouthernNet shall provide
written notice of the date on which capacity is to be made operable, and MPX
shall make all reasonable efforts to cause such capacity to be made available in
a timely manner. SouthernNet agrees to provide, semi-annually unless otherwise
agreed, to MPX, forecasts setting forth SouthernNet's best estimates of its
future needs for additional capacity, provided that such forecasts shall not be
binding on SouthernNet.
-12-
<PAGE>
6. Specifications; Testing.
-----------------------
6.1 MPX shall cause the System to satisfy the specifications set
forth in Exhibit B. MPX and SouthernNet may from time to time review these
---------
specifications and make modifications thereto by written consent; provided,
however, that nothing contained in this Section or in Exhibit B shall permit MPX
---------
to provide to SouthernNet a System operating at performance standards lower than
those imposed on SouthernNet by a state or federal regulatory authority having
subject matter jurisdiction.
6.2 Upon written notice by SouthernNet to MPX requesting such
testing, MPX shall perform, or shall cause the Utility Companies to perform
performance or service tests beyond those tests required for the normal
maintenance, restoration, and fault isolation on the System. If such requested
testing reveals no deficiencies in the System, then SouthernNet shall reimburse
MPX for the cost of such testing.
6.3 MPX shall provide, or shall cause the Utility Companies to
provide appropriate alarm monitoring and test equipment, spare parts, and
qualified personnel to properly maintain the System. Upon the request of MPX,
SouthernNet agrees to perform joint testing on an as-requested basis within four
(4) hours of any such request. MPX and SouthernNet shall provide each other a
technical contact (including name, address, office and home telephone numbers)
for coordination of testing covered under this Agreement. Two (2) alternates
shall also be provided by each party with the same information as stated above.
-13-
<PAGE>
7. Restoration in the Event of Outages. Upon any interruption of
-----------------------------------
the transmission capacity of the System, including any failure of such
transmission capacity to satisfy the specifications set forth in Exhibit B, MPX
---------
agrees to take or to cause the Utility Companies to take immediate steps to
provide restoration of such transmission capacity, and in any event to utilize
the same restoration procedures and priorities as are utilized by MPX and the
Utility Companies in maintaining and restoring the communications capacity of
MPX and the Utility Companies. Upon any such interruption, MPX shall
immediately notify, or shall cause the Utility Companies to immediately notify
SouthernNet of the circumstances surrounding such interruption and the efforts
necessary to restore full complying transmission capacity, including an
estimation of the time by which such a restoration shall be accomplished.
SouthernNet shall be entitled to investigate the circumstances surrounding such
interruption and to make its independent determination of the likely time of
restoration. If in the judgment of SouthernNet, MPX will not be able to achieve
full restoration of the System within a time period which permits SouthernNet to
adequately provide transmission capacity to its customers, then SouthernNet
shall be entitled to transfer any or all transmission service which has been
placed on the System to an alternative transmission capacity until such time as
the capacity is restored to service (with the result that all revenues with
respect to such transmission service lost during the outage shall be excluded
from the sharing provisions of Section 3 of this Agreement).
-14-
<PAGE>
8. Ownership of System. Except as noted below, the System and all
-------------------
equipment utilized therein shall be owned by MPX or the Utility Company.
Neither the provision of the System by MPX to SouthernNet hereunder, nor the
payments by SouthernNet contemplated hereby, shall create or vest in SouthernNet
any easement or any other ownership or property rights of any nature in the
System, except for rights to utilize the System for transmissions and to occupy
SouthernNet Space as provided herein. This Agreement shall not constitute an
assignment of any of MPX's or of the Utility Company's rights to use the public
or private property at the location of any facilities utilized in the System,
except for such SouthernNet Space leased or provided under this Agreement.
Notwithstanding the foregoing, in that portion of the System
identified in Exhibit A, II-1, from 55 Park Place to the Doraville junction, the
---------------
cable used shall consist of 24 fibers rather than 12 fibers. Said 12 additional
fibers shall contain no associated electronics and buildings and shall be owned
by SouthernNet or the Utility Company, but shall not be part of the System and
shall not be subject to revenue sharing pursuant to Section 3. SouthernNet
shall compensate MPX for the additional 12 fibers by paying the incremental
difference between the material cost of the 24 fiber cable placed in this
portion of the Route and the 12 fiber cable placed along the remainder of the
Route.
-15-
<PAGE>
9. Insurance. At all times during the term of this Agreement, MPX
---------
shall maintain or cause to be maintained fire and other casualty insurance
covering all equipment and other facilities utilized in the System, and personal
and property liability insurance consistent with reasonable industry standards
as may be mutually agreed upon from time to time by the parties hereto, or shall
maintain or cause to be maintained a system of self insurance, which will be in
accord with the practices of companies owning or operating properties of a
similar character and maintaining such systems of self insurance.
10. Condemnation and Casualty. If the whole or any part of the
-------------------------
equipment or other facilities utilized by MPX in the System are taken by any
public authority under the power of eminent domain or otherwise, or if any such
equipment or facilities are damaged or destroyed by fire or other casualty, then
in any such event MPX shall promptly repair and restore such equipment and
facilities, or provide substitute equipment and facilities, as necessary to
restore the System to full compliance with the provisions of this Agreement, all
at the sole cost and expense of MPX; provided that in any such event, if MPX
notifies SouthernNet that it cannot restore the System within a reasonable time,
SouthernNet shall be entitled to terminate this Agreement by written notice to
MPX.
- 16 -
<PAGE>
11. Access and Security.
-------------------
11.1 MPX hereby grants to SouthernNet the right of direct,
unaccompanied ingress and egress to all SouthernNet Space to be provided to
SouthernNet at the Points of Presence as described above, and express permission
to be on MPX's premises at all times as may be required for SouthernNet to
perform any appropriate maintenance and repair of its equipment located at such
SouthernNet Space. MPX will secure such rights of ingress and egress from the
Utility Company, and such rights shall only be constrained by reasonable
security requirements of the Utility Company.
11.2 SouthernNet shall have the right to visit any facilities of MPX
(other than the SouthernNet Space) utilized in providing the System upon
reasonable prior written notice to MPX, provided that MPX may require that a
representative of MPX or the Utility Company accompany any representatives of
SouthernNet making such visit. Such visitation right shall include the right to
inspect the System and to review worksheets, to review performance or service
data, and to review other documents used in conjunction with this Agreement.
Employees and agents of SouthernNet shall, while on the premises of MPX or the
Utility Company, comply with all rules and regulations, including security
requirements and, where required by government regulations, submission of
satisfactory clearance from the United States Department of Defense or other
federal authority.
- 17 -
<PAGE>
11.3 MPX shall provide SouthernNet's employees who are performing
work on, or who have access to, the SouthernNet Space with necessary clearance,
provided SouthernNet provides to MPX a list of those persons and updates the
list as required. MPX shall have the right to notify SouthernNet that certain
SouthernNet employees are excluded if, in the reasonable judgment of MPX or the
Utility Company, the exclusion of such employees is necessary for the proper
security and maintenance of MPX's or the Utility Company's facilities.
12. Expenses. Except for costs and expenses specifically assumed by
--------
a party under this Agreement, each party hereto shall pay its own expenses
incident to this Agreement and the transactions contemplated hereunder,
including all legal and accounting fees and disbursements.
13. Confidentiality. Each party agrees to provide to the other party
---------------
such information as shall be necessary to permit performance of their respective
obligations hereunder. Each party hereto shall identify as confidential
information ("Confidential Information") all information provided by such party
to the other party to this Agreement which is considered by such providing party
to be confidential, proprietary information. Neither party hereto will, without
the prior written consent of the party providing such Confidential Information,
(i) use any portion of such Confidential Information for any purpose other than
performance pursuant to this Agreement, or (ii) disclose any portion of such
Confidential
- 18 -
<PAGE>
Information to any persons or entities other than the officers and employees of
such party who reasonably need to have access to the Confidential Information
for purposes of performance under this Agreement and who are bound by
appropriate confidentiality agreements and commitments consistent with those
utilized by such party in protecting its own confidential information; or to
state, local or federal agencies legally requiring such information, provided
that such agency shall be requested to treat the information as proprietary and
confidential to the extent it has the legal ability to do so. The obligations
of a recipient party with respect to Confidential Information shall remain in
effect (during and after the Term of this Agreement) except to the extent that
(a) such Confidential Information becomes generally available to the public
other than as a result of unauthorized disclosure by the recipient or persons to
whom the recipient has made the information available, (b) such Confidential
Information has been released without restriction by the party providing the
Confidential Information to another person or entity, or (c) such Confidential
Information was received by the recipient on a non-confidential basis, prior to
receipt from such party, from a third party lawfully possessing and lawfully
entitled to disclose such information.
- 19 -
<PAGE>
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.
14. Other Activities of Party. Either party may engage in and
-------------------------
possess interests in other business ventures of any nature whatsoever, and may
conduct all activities, including activities in connection with fiber optic and
other transmission facilities, except as specifically and explicitly limited
pursuant to 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
pursuant to this Agreement, so long as a party does not violate any specific,
explicit restriction or obligation set forth in this Agreement.
15. 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.
- 20 -
<PAGE>
16. Dispute Resolution. Each party to this Agreement agrees to use
------------------
good faith efforts to negotiate and resolve any controversy or claim between the
parties hereto arising out of or relating to this Agreement or any breach
thereof (a "Dispute"). If a Dispute cannot be resolved through such efforts,
then any Member may seek resolution of a Dispute by submitting such Dispute to a
"Dispute Committee," consisting of one designee of each party, by a written
submission delivered to the other party. The Dispute Committee shall consider
the Dispute within the 30 day period following the date of such submission.
If any Dispute cannot be resolved by the Dispute Committee within said
period in accordance with the procedures set forth in the preceding paragraph,
then both parties shall be entitled to pursue their remedies at law and in
equity with respect to this dispute. MPX hereby agrees and confirms that the
System to be provided pursuant to this Agreement is unique. Accordingly, in
addition to any other remedies which SouthernNet may have at law or in equity,
MPX hereby agrees that SouthernNet shall have the right to have all obligations,
undertakings, agreement, covenants and other provisions of this Agreement
specifically performed by MPX, and that SouthernNet shall have the right to
obtain an order or decree of such specific performance in any of the courts of
the United States or of any state or other political subdivision thereof.
During the pendency of a Dispute, the parties shall continue to satisfy all of
their obligations pursuant to this Agreement.
- 21 -
<PAGE>
17. Representations and Warranties. Each of the parties to this
------------------------------
Agreement represents, warrants and covenants to the other party as follows:
(a) The execution and delivery of this Agreement by such party and
the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate, partnership or
other appropriate action on the part of such party.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby constitutes
a violation of or a default under, or conflicts with any terms
of, the articles of incorporation or bylaws or other
organizational documents of such party, or any law, contract,
commitment, indenture, lease or other agreement or understanding
to which it is a party or by which it is bound.
(c) This Agreement constitutes a valid and binding obligation of such
party, enforceable in accordance with its terms.
- 22 -
<PAGE>
18. 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 and/or a security interest herein to any lender to such
party, and either party shall be entitled to assign this Agreement to any entity
which controls, is controlled by or is under common control with such party and
to any entity which acquires all or substantially all of such party's assets.
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.
Nothing in this Agreement shall restrict the right of SouthernNet to
sell the Capacity on the System to SouthernNet's customers.
19. Amendment. This Agreement shall not be amended, altered or
---------
modified except by an instrument in writing duly executed by both parties.
- 23 -
<PAGE>
20. 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,
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 or permitted assigns.
21. Notices. 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 mailed by first-
class, registered or certified mail, return receipt requested, postage prepaid,
or transmitted by telegraph, addressed as follows:
- 24 -
<PAGE>
(a) If to MPX: MPX Systems, Inc.
P. 0. Box 764
c/o South Carolina Electric
& Gas
Columbia, S.C. 29218
Atten: Corporate Secretary
with a copy (which shall not constitute notice) to:
(b) If to SouthernNet SouthernNet, Inc.
61 Perimeter Park, N.E.
Suite 200
Atlanta, GA 30341
Attn: Corporate Secretary
with a copy (which shall not constitute notice) to:
Hogan & Hartson
Attorneys at Law
815 Connecticut Ave.
Washington, D.C. 20006
Attn: Jim Rosenhauer
- 25 -
<PAGE>
Each party may designate by notice in writing a new address 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 mailed in the manner described above, or which shall be delivered
to a telegraph company, 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 conclusive evidence of
such a delivery) or at such time as delivery is refused by the addressee upon
presentation.
22. 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.
- 26 -
<PAGE>
23. Independent Contractors. In all matters pertaining to this
-----------------------
Agreement, the relationship of MPX and SouthernNet shall be that of independent
contractors, and neither MPX nor SouthernNet 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 SouthernNet and MPX; and no party hereto shall have the power to bind or
obligate the 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, including social security, withholding and workmen's compensation
responsibilities.
24. 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.
- 27 -
<PAGE>
25. 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 best efforts to
obtain such consents, as may be necessary or 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.
26. 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.
27. 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.
28. Headings. 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.
- 28 -
<PAGE>
29. Counterparts. 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 of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than the number of
counterparts containing the respective signatures of or on behalf of all of the
parties.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed on their behalf, as of the day and year first hereinabove set
forth.
MPX, Inc.
By [SIGNATURE ILLEGIBLE]
--------------------------------------
SOUTHERNNET, INC.
By [SIGNATURE ILLEGIBLE]
--------------------------------------
- 29 -
<PAGE>
Exhibit A
I. Minimum Points of Presence, Completion Dates and Address
--------------------------------------------------------
<TABLE>
<C> <S> <C> <C>
1. Hartwell, Georgia August, 1986 202 N. Forest Ave.
2. Atlanta, Georgia August, 1986 55 Park Place
3. Jonesboro, Georgia August, 1986 Georgia Power Substation
</TABLE>
II. System Capacity
---------------
1. The total number of single mode fibers shall not be less than twelve (12)
along all portions of the System. The portion of the route from 55 Park
Place north to the Doraville Junction shall consist of 24 fibers, with the
additional fibers falling under the provisions of section 8.
2. The initial System configuration will consist of one 1X1 protected 405
megabit system. At each POP location, one 1Xl 405 megabit fiber optic
terminals will be utilized per network link.
3. Additional 405 megabit fiber optic terminals and M13 multiplexers will be
added for a maximum 1X4 system as required. Upgrading of the 405 megabit
electronics will occur based upon the minimum 12 fiber cable constraint.
4. The fiber optic transmission capacity retained by the Utility Company for
its internal communications needs shall be defined in the SCS Agreement as
"Primary Capacity".
<PAGE>
Exhibit B
System Specifications
- ---------------------
I. DS-l and DS-3 Transmission Specifications
1. DS-l and DS-3 signals shall comply with interconnection specifications
outlined in AT&T technical advisory No. 34.
2. The long term bit error rate shall be less than or equal
to lXl0 (to the ninth power).
3. The long term error free seconds shall be equal to or greater than
99.99%
4. System availability is defined as any two second interval with a bit
error rate equal to or exceeding 3X10 (to the seventh power), or when
a DS-3 frame cannot be found for eleven milliseconds or more.
5. System availability objectives except for catastrophic failure shall be
99.99% or greater.
6. System jitter requirements shall comply with Bell Core Technical
Publication 43806.
II. The digital fiber optic transmission system provided in this contract shall
conform with acceptance test procedures, transmission criteria, operations and
maintenance requirements as defined by the equipment manufacturers and by Bell
Core Technical Advisory TATSY000038.
III. Deliverables
MPX agrees to provide the following documentation after system turn up:
1. List of all equipment and materials used in the system
2. Acceptance test procedures and results
3. Alarm and restoration details for interfacing into the SouthernNet
network
4. O + M procedures
5. Technical liaison procedures
<PAGE>
Exhibit 10.23
FIRST AMENDMENT
ATLANTA-HARTWELL-JONESBORO
THIS FIRST AMENDMENT is made effective as of the 8th day of May, 1992,
("First Amendment") by and between MPX SYSTEMS, INC., a corporation organized
and existing under the TELECOMMUNICATIONS CORPORATION, a corporation organized
and existing under the laws of the State of Delaware ("MCI").
RECITALS
--------
A. MPX and SouthernNet entered into an agreement for the provision
of fiber optic services and facilities in or around July, 1986 ("the
Agreement").
B. Subsequent to the execution of the Agreement, all of the
rights, assets, and obligations of SouthernNet were purchased or otherwise
assumed by Telecom(*)USA.
C. In September, 1990, all of the rights, assets, and obligations
of Telecom(*)USA were purchased or otherwise assumed by MCI and MCI now holds
the rights previously held by SouthernNet in the Agreement.
D. MPX and MCI now desire to amend the Agreement in certain
respects.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. All references in the Agreement to SouthernNet shall be deleted and
MCI shall be substituted therefor.
2. Article 3, Revenue Sharing, shall be deleted and the following
language substituted therefor:
3.1 In exchange for the services and facilities provided in Article
1 of this Agreement, MCI shall pay MPX a fixed rate of $0.0475 per
DS-0 route mile along and between the route segments listed on the
attached Exhibit A-1. MCI also intends to use its reasonable efforts
-----------
within the framework of its network plan and capacity demands to
increase its utilization along the route segments listed on Exhibit
-------
A-1.
---
<PAGE>
3.2 In the event that MCI desires to lease additional circuits along
the route segments listed on Exhibit A-1, MCI and MPK shall negotiate
-----------
a Service Order in a form substantially similar to the attached
Exhibit C. The term of a Service Order may not exceed the term or any
---------
applicable extension period of this Agreement.
3.3 MCI agrees to pay MPX an aggregate monthly Service charge as
specified on the attached Service Order(s).
MCI's obligation to pay such monthly Service charge shall begin
on the Service Acceptance Date indicated on the attached Exhibit A-2,
-----------
Service Acceptance Form. 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 initial Service acceptance through
the end of the next month (e.g., April 16 through May 31). MCI shall
pay MPX's invoice within forty-five (45) days of the date of the
invoice or the date of MCI's receipt, whichever is latest (the
"invoice due date") and shall be subject to a late payment charge
calculated from the invoice due date to the date paid, equal to one
and one-half percent (1 1/2%) per month or the highest state rate
permitted by law, pro rated on the basis of thirty (30) days, not to
exceed fifteen percent (15%) per annum.
3.4 Any additional circuits ordered by Service Order shall be tested
and accepted in accordance with the terms of Article 5, 6, and 7 of
this Agreement. If the newly ordered circuits fail to meet Technical
Specifications as required in Exhibit B, MCI shall not be obligated to
---------
accept the circuits until such time as MPX has corrected the problem
and the circuits do meet the required Technical Specifications.
3. Article 21(b) shall be deleted and the following substituted
therefore:
(b) if to MCI: MCI Telecommunications
Corporation
1801 Pennsylvania Avenue, NW
Washington, DC 20036
Attn: Vice President
Technical Planning
-2-
<PAGE>
4. The terms of this First Amendment shall supersede any conflicting
terms of the Agreement. The terms of the Agreement not expressly amended by
this First Amendment shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the day
and year first written above.
MPX SYSTEMS, INC. MCI TELECOMMUNICATIONS
CORPORATION
By: /s/ M.D. Blackwell By: /s/ James MacGuidwin
------------------------------ ------------------------------
Name: M.D. Blackwell Name: James MacGuidwin
---------------------------- ----------------------------
Title: General Manager Title: Vice President
--------------------------- ---------------------------
Technical Planning
Attest: Attest:
By: /s/ Judy W. Clas By: /s/ Edward G. Freitig
------------------------------ ------------------------------
Name: Judy W. Clas Name: Edward G. Freitig
---------------------------- ----------------------------
Title: Administrative Manager Title: Asst. Secret.
--------------------------- ---------------------------
- 3 -
<PAGE>
EXHIBIT A-1
ROUTE SEGMENTS
--------------
The Route Segments pertaining to this Agreement include all points of presence
between Atlanta-Hartwell-Jonesboro on MPX's Network.
<PAGE>
Exhibit 10.24
SECOND AMENDMENT
TO
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC SERVICES AND FACILITIES
THIS SECOND AMENDMENT TO AGREEMENT FOR THE PROVISION OF FIBER OPTIC
SERVICES AND FACILITIES (this "Second Amendment"), by and between MPX Systems,
Inc., a South Carolina corporation ("MPX"), and MCI Telecommunications
Corporation, a Delaware corporation ("MCI"), is made as of the date on which it
has been executed by both parties.
RECITALS
--------
A. MPX and SouthernNet, Inc. entered into that certain Agreement for the
Provision of Fiber Optic Services and Facilities in or around July 1986 (the
"Agreement")
B. Subsequent to the execution of the Agreement, all of the rights, assets
and obligations of SouthernNet, Inc. were purchased or otherwise assumed by
Telecom*USA.
C. In September 1990, all of the rights, assets and obligations of
Telecom*USA were purchased or otherwise assumed by MCI and MCI now holds the
rights previously held by SouthernNet in and under the Agreement.
D. MPX and MCI entered into a First Amendment to the Agreement, effective
as of May 8, 1992.
E. MPX and MCI now desire to further amend the Agreement in certain
respects pursuant to this Second Amendment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, MPX and MCI agree as follows:
1. The first and second "WHEREAS" clauses on page 1 of the Agreement are
hereby deleted and replaced with the following:
"WHEREAS, MPX entered into certain agreements with Southern
Company Services, Inc. for itself and as agent for Georgia Power
Company (the "Utility Company") pursuant to which MPX obtained rights
to place fiber optic cable along certain transmission lines of the
Utility Company, and MPX is currently operating fiber optic
transmission systems in conjunction with the Utility Company along
such network (the "First Network").
WHEREAS, MPX entered into certain agreements with Interstate
FiberNet, Standard Telephone Company and Hart Telephone Company for the
<PAGE>
joint construction of a fiber optic network and the operation by MPX
of certain fiber optic transmission systems on such network upon
completion of construction thereof (the "Second Network").
WHEREAS, MPX wishes to provide to MCI certain telecommunications
services on the First Network and the Second Network, and MCI wishes to
obtain such services from MPX, on the terms and conditions set forth in
this Agreement."
2. Section 1.1 of the Agreement is hereby deleted and replaced with the
following:
"1.1 MPX agrees to provide MCI with certain fiber optic
telecommunications services on the First Network between Hartwell,
Georgia and Atlanta, Georgia (the "Primary Route") and on the Second
Network between Hartwell, Georgia and Atlanta, Georgia (the "Diverse
Route). Specifically, MPX shall provide to MCI all of the capacity
within six (6) optical fibers along the Primary Route and within four
(4) optical fibers along the Diverse Route (collectively, the
"Capacity"), which Capacity shall consist of fiber optic transmission
systems configured into usable end-to-end systems to be made available
to MCI from points of presence or points of connection ("Points of
Presence") of MCI, as specified on Exhibit A attached hereto and made a
---------
part hereof (collectively, the "System"). Each Point of Presence shall
be located at a site in the city or other geographic location specified
on Exhibit A. The parties acknowledge and agree that the System shall
---------
initially be configured as two (2) diverse 3:1 OC-48 transmission
systems; one (1) on the Primary Route and one (1) on the Diverse Route.
The Primary Route and the Diverse Route are collectively referred to
herein as the "Route"."
3. Section 1.2 of the Agreement is hereby deleted and replaced with the
following:
"1.2 The parties understand and agree that, in addition to the
capacity within six (6) optical fibers along the Primary Route which
is being provided to MCI pursuant to this Agreement, MPX will provide
four (4) optical fibers along the Primary Route for joint use by
Interstate FiberNet, Standard Telephone Company and Hart Telephone
Company. Additionally, two (2) optical fibers along the Primary Route
shall be retained by the Utility Company for its internal
telecommunications needs. MPX acknowledges and agrees that no person or
entity, other than those described herein, shall be permitted to use
any fiber or capacity along the Primary Route for so long as this
Agreement remains in effect."
4. Sections 3.1, 3.2, 3.3 and 3.4 of the Agreement, as amended by the
First Amendment to the Agreement, are hereby deleted and replaced with the
following:
"3. Compensation. Subject to the terms hereof and as consideration
------------
for
2
<PAGE>
MPX providing the Capacity and the System to MCI pursuant hereto, MCI shall
pay to MPX an aggregate monthly charge of Two Hundred Ninety-Two Thousand
Four Hundred Sixty-Eight and 83/100 Dollars ($292,468.83). MCI's obligation
to pay such monthly charge shall begin on the Completion Date as defined in
Section 5 of this Agreement. MCI shall be invoiced by MPX every thirty (30)
days in advance of that particular month's service (e.g. January 1st
invoice for the month of January); provided, however, that the first
invoice shall be prorated and shall cover the period from the Completion
Date through the end of the next month (e.g., June 16 through July 31). MCI
shall pay each invoice within forty-five (45) days of the date of the
invoice or the date of MCI's receipt of the invoice, whichever is latest."
5. Section 4 of the Agreement is hereby deleted and replaced with the
following:
"4. Term. The term of this Agreement, as amended, shall be for a
----
period of five (5) years beginning on the Completion Date as defined in
Section 5 of this Agreement (the "Original Term"). MCI shall have the
option to renew this Agreement for additional successive five (5) year
terms upon the same terms and conditions set forth herein. Such renewal
option(s) shall be exercised by the giving of written notice to MPX at
least ninety (90) days prior to the expiration of the then-current term.
Otherwise, this Agreement shall automatically renew on a month-to-month
basis upon the same terms and conditions set forth herein, unless
terminated by either party upon at least ninety (90) days prior written
notice to the other party. Each additional five (5) year renewal term or
monthly term is referred to herein as a "Renewal Term"; the Original Term
and any Renewal Terms are collectively referred to herein as the "Term"."
6. Section 5 of the Agreement is hereby deleted and replaced with the
following:
"5. Completion. Upon completion, in accordance with Section 1 and
----------
Section 6 hereof, of each portion of the System identified in Section III
of Exhibit A, MPX shall provide MCI written notice of said completion,
---------
together with copies of all tests that were used by MPX to determine that
such portion of the System was complete and met all applicable technical
standards. Within fifteen (15) days after the date of each such notice from
MPX, MCI shall notify MPX in writing whether MCI agrees that such portion
of the System has been so completed, specifying any incompleteness which
MCI has identified. The date of the notice from MCI to MPX that the last
remaining portion of the System identified in Section III of Exhibit A has
---------
been completed shall be deemed to be the "Completion Date" hereunder.
Notwithstanding anything in this Agreement to the contrary, MCI shall have
the right to terminate this Agreement upon written notice to MPX, without
liability or further obligation hereunder, if any portion of the System
identified in Section III of Exhibit A is not completed in accordance with
---------
3
<PAGE>
this Agreement, and if MCI has not given notice to MPX agreeing that
such portion of the System is so completed, on or before the applicable
dates specified in Section III of Exhibit A."
---------
7. The heading of Section 7 of the Agreement is hereby amended to read:
"Restoration in the Event of Outages; Credits; Termination."
---------------------------------------------------------
8. The last sentence of Section 7 of the Agreement is hereby deleted and
replaced with the following:
"In any event, MCI shall receive a credit against succeeding invoices
under Section 3 of this Agreement in an amount equal to the prorated
value of all such interrupted services during the preceding calendar
month (e.g., if service on the Diverse Route is interrupted for an
aggregate of 2 days in a calendar month, MCI shall receive a credit
against the next month's invoice in an amount equal to one half of the
monthly fees due under Section 3 hereof, divided by the number of days
in the month during which the interruption occurred, multiplied by 2).
Furthermore, if an interruption occurs on more than five (5) days
during any thirty (30) day period, MCI shall have the right, at its
option, to either (a) receive a credit against amounts owing under the
next month's invoice as set forth in the immediately preceding
sentence, or (b) terminate this Agreement upon written notice to MPX,
without liability or further obligation hereunder."
9. The words "and shall not be subject to revenue sharing pursuant to
Section 3" are hereby deleted from the second sentence of the second paragraph
of Section 8 of the Agreement.
10. The following is hereby added at the end of the last sentence of
Section 10 of the Agreement:
";and, provided further in any such event, that MCI shall receive a
credit against succeeding invoices under Section 3 of this Agreement in
an amount equal to the prorated value of the System that was not so
restored or replaced during the preceding calendar month (e.g., if MPX
is unable to restore or replace service along the Diverse Route for 10
days in a calendar month, MCI shall receive a credit against the next
month's invoice in an amount equal to one half of the monthly fees due
under Section 3 hereof, divided by the number of days in the affected
month, multiplied by 10)."
11. Section 16 of the Agreement is hereby deleted and replaced with the
following:
"16. 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
4
<PAGE>
Procedures ("Endispute Rules"). 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 ABA-
AAA Code of Ethics for Arbitrators in Commercial Disputes. MPX agrees
and confirms that the System to be provided to MCI pursuant to this
Agreement is unique, and MPX accordingly agrees that the arbitrator
shall have the authority, in addition to any other remedies which may
be awarded hereunder, to order that all obligations, undertakings,
agreements, covenants and other provisions of this Agreement be
specifically performed by MPX. 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 damages. The arbitrator's decision shall
follow the plain meaning of the 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."
12. The words "or transmitted by telegraph" in the first paragraph of
Section 21 of the Agreement are hereby deleted and replaced with the following:
"or by commercial overnight delivery service, or transmitted by
facsimile"
13. Section 21(a) of the Agreement is hereby deleted and replaced with the
following:
"(a): If to MPX: MPX Systems, Inc.
Attention: Tim M. Jones
440 Knox Abbott Drive
Cayce, SC 29033
Fax: (803) 343-2387"
14. Section 21(b) of the Agreement, as amended by the First Amendment to
the Agreement, is hereby deleted and replaced with the following:
"(b) If to MCI: MCI Telecommunications Corporation
Contracts Management, Dept. 1103
400 International Parkway
Richardson, TX 75801
Fax: (214) 918-3303
with a copy (which shall not constitute notice) to:
5
<PAGE>
MCI Telecommunications Corporation
Office of General Counsel - Network and Facilities
Department 0598
1133 19th Street, N.W.
Washington, D.C. 20036
Fax: (202) 736-6666"
15. The last sentence of Section 21 of the Agreement is hereby deleted and
replaced with the following:
"Each notice, demand, request, approval or other communication sent
hereunder shall be deemed sufficiently delivered, served, sent or
received for all purposes on the date of return receipt acknowledgment
(in the case of notices sent via U.S. Mail), or on the next day after
the date the notice was sent (in the case of notices sent by either
overnight delivery service or by facsimile) or at such time as
delivery is refused by the addressee upon presentation."
16. Exhibit A and Exhibit B to the Agreement are hereby deleted and
--------- ---------
replaced with Exhibit A and Exhibit B attached hereto.
--------- ---------
17. Exhibit A-1, Exhibit A-2 and Exhibit C to the Agreement are hereby
----------- ----------- ---------
deleted.
18. This Second Amendment shall be effective on and as of the date and
year last written below. Notwithstanding the foregoing or any other provision of
this Second Amendment to the contrary, the terms of the Agreement, as amended by
the First Amendment to the Agreement (and without taking into account the effect
of this Second Amendment), shall continue to govern the parties until the
Completion Date with respect to the capacity currently being provided by MPX to
MCI on the Primary Route pursuant to the existing 4:1 OC-48 transmission system.
Except as set forth in the immediately preceding sentence, the terms of this
Second Amendment shall supersede any conflicting terms of the Agreement or the
First Amendment to the Agreement. The terms of the Agreement not expressly
amended herein or in the First Amendment to the Agreement shall remain in full
force and effect.
19. Any capitalized terms used but not defined herein shall have the
meanings given to such terms in the Agreement or the First Amendment to the
Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on their behalf as of the day and year last written
below.
MPX SYSTEMS,INC. MCI TELECOMMUNICATIONS
CORPORATION
By: /s/ M. I. Blackwell By: /s/ Keith E. Steiner
---------------------------- -------------------------------------
Name: Mike Blackwell Name: Keith E. Steiner
-------------------------- -----------------------------------
Title: Executive Vice President Title: Vice President, Network Engineering
------------------------- -----------------------------------
Date: January 30, 1996 Date: 1/16/96
-------------------------- ----------------------------------
ATTEST: ATTEST:
By: William B. Timmerman By: /s/ Mary Steigman
---------------------------- -------------------------------------
Name: /s/ William B. Timmerman Name: Mary Steigman
-------------------------- -----------------------------------
Title: Assistant Secretary Title: Assistant Secretary
------------------------- ----------------------------------
[Corporate Seal] [Corporate Seal]
7
<PAGE>
EXHIBIT A
I. MCI POINTS OF PRESENCE:
----------------------
1. Hartwell, Georgia 202 N. Forest Avenue
2. Atlanta, Georgia 55 Park Place
II. NOTES:
-----
1. A portion of the Primary Route located between 55 Park Place and the
Doraville Junction shall consist of twenty-four (24), rather than
twelve (12), optical fibers, with the additional twelve (12) fibers
falling under the provisions of Section 8 of the Agreement.
III. COMPLETION OF SYSTEM:
--------------------
Portion of System Date
----------------- ----
Two (2) working channels and 6/30/96
one (1) spare OC-48 channel on
the Diverse Route.
One (1) additional working OC-48 channel 8/31/96
on the Diverse Route.
Three (3) working channels and one (1) spare 8/31/96
OC-48 channel on the Primary Route.
8
<PAGE>
Exhibit 10.25
NETWORK OPERATING AGREEMENT
between
GULF STATES FIBERNET
TRINET, INC.
HART COMMUNICATIONS, INC.
MPX SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<C> <S> <C>
SECTION 1 DEFINITIONS..................................................................... 2
SECTION 2 GENERAL DESCRIPTION OF THE NETWORK.............................................. 6
2.1 General Description of the Network.............................................. 6
2.2 Relationship of the Parties..................................................... 6
2.3 Use of Physical Facilities...................................................... 6
2.4 Responsibility for Management, Operation and Sale of Network Capacity........... 7
2.5 Sale of Capacity Between Parties................................................ 7
2.6 Compensation Sharing Mechanisms................................................. 7
SECTION 3 PROVISION OF PHYSICAL FACILITIES................................................ 8
3.1 Gulf States..................................................................... 8
3.2 TriNet.......................................................................... 8
3.3 Hart............................................................................ 9
3.4 MPX............................................................................. 9
3.5 TriNet and Hart................................................................. 9
SECTION 4 DARK FIBER LEASE OPTION BETWEEN TRINET, HART AND .... . ........................ 9
4.1 Options......................................................................... 9
4.2 Exercise of Option.............................................................. 10
4.3 Dark Fiber Lease Form........................................................... 10
SECTION 5 OPERATING STANDARDS............................................................. 10
5.1 Obligation to Comply With Opening Standards..................................... 10
5.2 Operations Manual............................................................... 10
5.3 Intermediate POPs and Regenerator Stations...................................... 10
5.4 Engineering Minimums for POPs, Intermediate POPs, Regenerator Stations.......... 10
5.5 Interface to Carolina Fibernet.................................................. 11
5.6 Maintenance Standards........................................................... 11
5.7 Equipment Compatibility and Interconnection..................................... 11
5.8 Service Interruption............................................................ 11
SECTION 6 ADMINISTRATION OF THE GULF/TRINET/HART RING..................................... 11
6.1 Books and Records............................................................... 11
6.2 Inspection and Audit............................................................ 12
6.3 Revenue and Traffic Projections................................................. 12
SECTION 7 REGULATORY APPROVALS............................................................ 13
SECTION 8 REPRESENTATIONS AND WARRANTIES.................................................. 13
8.1 Organization; Good Standing; Qualification...................................... 13
8.2 Corporate Power; Authorization; Enforceable Obligations......................... 13
8.3 Due Execution and Binding Effect................................................ 13
8.4 Compliance with Law; Regulatory Authority....................................... 13
8.5 No Material Misrepresentation or Omission....................................... 13
8.6 Ownership of and Access to Physical Facilities.................................. 14
8.7 Claims and Encumbrances......................................................... 14
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
8.8 Condition of Physical Facilities ............................................... 14
SECTION 9 ADDITIONAL COVENANTS............................................................ 14
9.1 Notice of Action or Proceeding.................................................. 14
9.2 Claims and Encumbrances......................................................... 14
9.3 Access to Physical Facilities................................................... 14
9.4 Further Assurances.............................................................. 14
SECTION 10 EXPENSES........................................................................ 15
SECTION 11 DISPUTE RESOLUTION.............................................................. 15
11.1 Negotiation; Arbitration; Georgia Jurisdiction.................................. 15
11.2 Commencement; Selection of Arbitrator; Award.................................... 15
11.3 Enforceability.................................................................. 15
11.4 Expenses........................................................................ 15
SECTION 12 INDEMNIFICATION AND LIABILITY................................................... 16
12.1 General Indemnification Obligation.............................................. 16
12.2 Method of Asserting Claims...................................................... 16
12.3 Payment......................................................................... 17
12.4 Liability....................................................................... 17
SECTION 13 SPECIFIC PERFORMANCE............................................................ 17
SECTION 14 TERM, TERMINATION AND BREACH.................................................... 18
14.1 Term............................................................................ 18
14.2 Breach.......................................................................... 18
14.3 Termination..................................................................... 18
14.4 Effect of Expiration or Termination............................................. 18
SECTION 15 FORCE MAJEURE................................................................... 18
SECTION 16 INTANGIBLE PROPERTY............................................................. 19
16.1 Confidential Information........................................................ 19
16.2 Intangible Property............................................................. 19
16.3 Marks........................................................................... 19
16.4 Trade Secrets................................................................... 19
16.5 Obligation and Acknowledgments.................................................. 19
16.6 Treatment of Intangible Property................................................ 20
16.7 Use of Marks.................................................................... 20
16.8 Non-Disclosure.................................................................. 20
SECTION 17 OTHER VENTURES.................................................................. 21
SECTION 18 GENERAL PROVISIONS.............................................................. 21
18.1 Amendment....................................................................... 21
18.2 Partial Exercise of Rights...................................................... 21
18.3 Survival........................................................................ 21
18.4 Merger.......................................................................... 21
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
18.5 Binding Effect; Assignment...................................................... 21
18.6 Governing Law................................................................... 22
18.7 Severability.................................................................... 22
18.8 Limitation on Benefits and Enforcement.......................................... 22
18.9 Recovery of Costs of Enforcement................................................ 22
18.10 Notices......................................................................... 22
18.11 Interpretation.................................................................. 23
18.12 Counterparts.................................................................... 23
EXHIBIT A....................................................................................... 24
EXHIBIT B....................................................................................... 26
EXHIBIT C....................................................................................... 27
EXHIBIT D....................................................................................... 28
EXHIBIT E....................................................................................... 29
EXHIBIT F....................................................................................... 30
EXHIBIT G....................................................................................... 31
</TABLE>
<PAGE>
NETWORK OPERATING AGREEMENT
AMONG Gulf States FiberNet, a Georgia general partnership ("Gulf States"),
TriNet, Inc. a Georgia corporation ("TriNet"), Hart Communications, Inc., a
Georgia corporation ("Hart"), and MPX Systems, Inc., a South Carolina
corporation ("MPX") (collectively "Parties" and individually, "Party").
RECITALS
WHEREAS, each Party owns, or is constructing, certain fiber-optic cable and
related facilities in Georgia over which it has, or will have, the capacity to
carry communications transmissions;
WHEREAS, Gulf States desires to obtain a means to transmit communications
between its Gainesville, Georgia and/or Winder, Georgia points of presence
("POPs," as defined below, such POPs referred to herein as "Gainesville" and
"Winder," respectively) and the Carolina FiberNet Interface (as defined below)
at Toccoa, Georgia, where TriNet has a POP (such POP referred to herein as
"Toccoa") and at Hartwell, Georgia, where Hart has a POP (such POP referred to
as "Hartwell");
WHEREAS, TriNet and Hart desire to provide communications transmission
capacity to carry Gulf States' communications traffic between Gainesville and/or
Winder and the Carolina Fibernet Interface at Toccoa and/or Hartwell and other
points in the Network (as defined below);
WHEREAS, Gulf States has agreed to pay to each of TriNet and Hart an equal
portion of Gulf States' revenue derived from the communications traffic that
TriNet and Hart will carry between Gainesville and/or Winder and the Carolina
Fibernet Interface at Toccoa and/or Hartwell or other points in the Network;
WHEREAS, TriNet and Hart desire to obtain access to the Gulf States Network
and Interstate FiberNet Network (as defined below) for the purpose of
transmitting TriNet's and Hart's communications traffic, and Gulf States desires
to sell such capacity to TriNet and Hart at Prevailing Carrier's Carrier Rates
(as defined below);
WHEREAS, Gulf States desires to buy communications transmission capacity
into TriNet's and Hart's respective service areas and on Carolina FiberNet to
transmit communications traffic, and TriNet and Hart desire to sell such
capacity to Gulf States as set forth below;
WHEREAS, MPX conveys communications traffic between its POPs at Winder and
Hartwell (such POPs are referred to herein as "Winder" and "Hartwell,"
respectively) and desires to obtain a diversity route for its communications
traffic between Winder and Hartwell;
WHEREAS, Gulf States, TriNet and Hart desire to provide MPX with a
diversity route for MPX's communications transmissions between Winder and
Hartwell;
WHEREAS, MPX has agreed to grant Gulf States, TriNet and Hart the right to
transmit communications traffic between Winder and Hartwell over certain of
MPX's fiber-optic lines;
WHEREAS, TriNet and Hart each desires to improve its ability to provide
highly-reliable communications capacity for its respective customers;
<PAGE>
WHEREAS, Gulf States and MPX each has a POP in Atlanta and has agreed to
make its POP available for use by the Parties in connection with communications
transmitted on the Network;
WHEREAS, MPX has agreed to provide Operational Space (as defined below)
available for use by the Parties in connection with communications transmitted
on the Network;
WHEREAS, to meet the Parties' obligations to provide the above-described
services, each Party has agreed to provide access to, and use of, certain
facilities, equipment and operating space pursuant to the terms and conditions
of this Agreement;
WHEREAS, this Agreement will provide for sufficient capacity, equipment,
and operating space to permit operation of two (2) two-fiber fiber-optic rings
(as defined below) and one (1) four-fiber fiber-optic route (as defined below),
each involving the POPs identified on Exhibit A (such fiber-optic rings and
route being referred to herein collectively as the "Network");
WHEREAS, the Parties have agreed that, for the efficient operation of the
Network, Gulf States, TriNet and Hart will operate one (1) two-fiber fiber-optic
ring of the Network (the "Gulf/TriNet/Hart Ring"), TriNet and Hart will operate
the other two-fiber fiber-optic ring of the Network (the "TriNet/Hart Ring"),
and MPX will operate its diversity route over the four-fiber fiber-optic route
of the Network (the "MPX Diversity Route"); and
WHEREAS, the Parties are using best efforts to construct all required
facilities as expeditiously as possible and have begun operational tests of some
or all of the Network.
NOW, THEREFORE, in consideration of the mutual promises and other valuable
consideration contained herein, the sufficiency of which is hereby acknowledged,
and intending to be bound hereby, the Parties agree as follows:
SECTION I DEFINITIONS
-----------
Unless expressly stated elsewhere in this Agreement, the use of the following
capitalized terms shall have the following meaning throughout this Agreement:
ADM means an Add-Drop Multiplexer that complies with the Operating
---
Standards.
Affiliate means any individual, partnership, joint venture, corporation,
---------
trust, or unincorporated organization that directly or indirectly controls,
is controlled by, or is under common control with a Party. For purposes of
defining Affiliate, control means the possession, directly or indirectly,
of the power to direct, or to cause the direction of, any person or entity
of whatsoever kind, whether through ownership of securities, by contract,
or otherwise.
Agreement means this Network Operating Agreement together with all
---------
Exhibits.
Atlanta means the respective points of presence maintained and operated by
-------
Gulf States and MPX, located at 55 Park Place, Atlanta, GA 30303.
Carolina Fibernet means the interstate communications network that
-----------------
transmits communications in and throughout Georgia, South Carolina and
North Carolina.
Page 2
<PAGE>
Carolina Fibernet Interface means the physical point of demarcation at
---------------------------
Toccoa and/or Hartwell between the Network or Network Equipment and
Carolina Fibernet or Carolina Fibernet equipment through which
transmissions will exit the Network to Carolina Fibernet or enter the
Network from Carolina Fibernet.
Circuit means a connection carrying communications on the Network and
-------
connecting two points on the Network.
Claim Notice is defined in Section 12.2.1.
------------
Claim Notice Period is defined in Section 12.2.1.
-------------------
Confidential Information is defined in Section 16.1.
------------------------
Cure Period is defined in Section 14.2.
-----------
Dark Fiber mean fiber-optic cable without accompanying transmission service
----------
support and, therefore, without the current capacity to carry
communications transmissions.
Dark Fiber Lease means an executed Dark Fiber Lease between MPX and TriNet
----------------
or MPX and Hart.
Disconnect Period is defined in Section 14.4.
-----------------
Engineering Minimums are the situation requirements for each POP,
--------------------
Intermediate POP or Regenerator Station set forth in Exhibit F.
Equipment means all devices that are not Circuits and that are necessary to
---------
process communications on the Network and/or to interconnect the Physical
Facilities of the Network to Carolina FiberNet and to connect the
Gulf/TriNet/Hart Ring to the Gulf States Network or Interstate FiberNet
Network, including without limitation all necessary elements and components
to provide interfaces, termination, transmission service support, and
electronic connections.
Fiber means a fiber-optic cable that complies with the Operating Standards
-----
(as defined below) of this Agreement accompanied by sufficient transmission
service support for the cable to be put into service carrying
communications transmissions contemplated by this Agreement and in
compliance with the Operating Standards.
Force Majeure is defined in Section 15.
-------------
Gainesville means the respective Points of Presence maintained and operated
-----------
by Gulf States or TriNet in Gainesville, Georgia, located at 340 Jesse
Jewell Parkway SE, Gainesville, GA 30501.
Gulf States Network means the fiber-optic Communications network owned by
-------------------
Gulf States FiberNet and managed by Interstate FiberNet, that transmits
Communications in and through Louisiana, Mississippi, Alabama and Georgia.
Page 3
<PAGE>
Gulf/TriNet/Hart Ring means the component fiber-optic ring of the Network,
---------------------
as diagrammed in Exhibit B, that Gulf States will manage, Gulf States,
TriNet and Hart will operate jointly, and for which Gulf States, TriNet
and/or Hart will designate the communications to be transmitted.
Hartwell means the respective Points of Presence maintained and operated by
--------
MPX and Hart in Hartwell, Georgia, located at 350 West Franklin Street,
Hartwell, GA 30643.
Indemnified Party is defined in Section 12.1.
-----------------
Indemnifying Party is defined in Section 12.1.
------------------
Initial Term is defined in Section 14.1.
------------
Intangible Property is defined in Section 16.2.
-------------------
Intermediate POP is a POP other than Gainesville, Winder, Hartwell or
----------------
Toccoa, designated by a Party, pursuant to Section 5.3 below, for routing
traffic over a Network Circuit provided by the designating Party.
Interstate FiberNet means the interstate communications carrier that owns,
-------------------
operates and manages fiber-optic communications networks that transmit
communications in and through Louisiana, Mississippi, Alabama and Georgia.
Leased Property means Dark Fiber that MPX may lease from either TriNet or
---------------
Hart pursuant to the provisions of Section 4 below and a Dark Fiber Lease.
Leased Property is included in the Physical Facilities.
Marks is defined in Section 16.3.
-----
Material Breach is defined in Section 14.3.2.
---------------
MPX Diversity Route means the component fiber-optic route of the Network,
-------------------
as diagrammed in Exhibit B, that will be managed and operated by, and
transmit communications designated by, MPX.
Network means the Physical Facilities provided under this Agreement that
-------
form the Gulf/TriNet/Hart Ring, the TriNet/Hart Ring and the MPX Diversity
Route.
Operating Standards means the body of parameters and responsibilities set
-------------------
forth in Section 5 and Exhibits E and F, as they may be amended from time
to time, to govern the Network and its operation.
Operational Space means that space at either a POP, an intermediate POP or
-----------------
a Regenerator Station that a Party will provide under this Agreement for
placement of the Physical Facilities that will be used to operate the
Network.
Physical Facilities means the Circuits, Equipment and Operational Space
-------------------
that form the Network, including Leased Property.
Page 4
<PAGE>
Point of Presence or POP means the physical location of Equipment where at
------------------------
least one Party interconnects with the Network.
Prevailing Carrier's Carrier Rates means the current rates quoted to
----------------------------------
prospective customers for transport communications services, taking into
account contract terms and conditions, any applicable discounts and/or
promotional credits in effect at the time of quotation. Such rates are
subject to change, without notice, beyond the validity date of the
quotation.
Price Floor is defined in Section 6.2.2.
-----------
Regen or Regenerator means a device that restores a signal to its original
--------------------
form.
Regenerator Station means the point on a Circuit where a Party has placed
-------------------
Regen Equipment.
Revenue Sharing Agreement means the agreement among Gulf States, TriNet and
-------------------------
Hart regarding the sharing of revenue among them from operation of the
Gulf/TriNet/Hart Ring and attached hereto as Exhibit D.
Service Order means Exhibit G.
-------------
Supplemental Term is defined in Section 14.1.
-----------------
Terminal means a Network Equipment device, howsoever equipped, that is
--------
capable of either originating or receiving voice and/or data transmissions
conveyed over the Circuits.
Termination Date is defined in Section 14.2.1.
----------------
Termination Notice is defined in Section 14.2.1.
------------------
Toccoa means the Point of Presence maintained by TriNet in Toccoa, Georgia,
------
located at Bell's Plaza, Unit No.4, Route 5, Brookhaven Circle, Toccoa, GA
30577.
Trade Secrets is defined in Section 16.4.
-------------
TriNet/Hart Agreement means the separate agreement among TriNet and Hart
---------------------
relating to the TriNet/Hart Ring.
TriNet/Hart Ring means the component fiber-optic ring of the Network, as
----------------
diagrammed in Exhibit B, that will be managed and operated by, and transmit
communications designated by, TriNet and Hart.
Winder means the respective Points of Presence maintained by Gulf States
------
and MPX in Winder, Georgia, located at 407 Cedar Creek Road, Winder, GA
30680.
Page 5
<PAGE>
SECTION 2 GENERAL DESCRIPTION OF THE NETWORK
----------------------------------
2.1 General Description of the Network. The Parties agree that the Network will
----------------------------------
be configured as shown on Exhibit B, attached hereto and incorporated
herein by reference. The Network will utilize the POPs listed on Exhibit A
and may utilize additional Intermediate POPs or Regenerator Stations
pursuant to Section 5.3 below. Where more than one (1) Party maintains an
independent presence at a Network POP, those Parties operating at such POP
agree jointly to determine how the Physical Facilities will be configured
and operated at the POP. The Physical Facilities shall be configured and
operated in conformance with this Agreement, including all Operating
Standards. Each Party is responsible for all Operational Space and
Equipment on its Network Circuits, including any at Intermediate POPs
and/or Regenerator Stations, that are necessary or agreed to for Network
operation in conformance with the Operating Standards.
2.2 Relationship of the Parties. Nothing in this Agreement shall be construed
---------------------------
to create a partnership or joint venture or any other relationship among
the Parties other than that of independent parties contracting for the
purposes of carrying out the provisions of this Agreement. In designating
Physical Facilities for use in the operation of the Network in Section 3
below, the Parties in no way intend to convey to any other Party any
property rights or interests in the designated Physical Facilities, except
for the contractual right to use such Physical Facilities as specifically
set forth in this Agreement. The Parties agree that this Agreement, to the
extent it is subject to FCC regulation, is an inter-carrier agreement not
subject to filing requirements of Section 211(a) of the Communications Act
of 1934, as amended.
2.3 Use of Physical Facilities.
--------------------------
2.3.1 Services Offered on the Network Excluded. This Agreement applies
----------------------------------------
only to the Parties' arrangements to share the Physical Facilities
and shall not apply to services offered by a Party over the Network.
The Parties agree that a Party that offers a service over the
Network is the only communications carrier of that service, and that
a Party has no responsibility to another Party's customers beyond
those obligations imposed by this Agreement.
2.3.2 Formation of End-to-End Service. Physical Facilities provided to a
-------------------------------
Party under this Agreement may be connected to other facilities,
provided by either that Party, another Party or a third party, to
permit the formation of an end-to-end service.
2.3.3 Rates, Terms and Conditions of Services Provided Over the Network.
-----------------------------------------------------------------
Subject to the requirements of Section 6.2 below, the Revenue
Sharing Agreement, any additional compensation sharing mechanism
among one or more of Gulf States, TriNet and Hart pursuant to
Section 2.6 below, and the TriNet/Hart Agreement, the rates, terms
and conditions of services provided over the Network are the
responsibility of the Party contracting with a customer for that
service.
Page 6
<PAGE>
2.4 Responsibility for Management, Operation and Sale of Network Capacity.
---------------------------------------------------------------------
2.4.1 Gulf/TriNet/Hart Ring.
---------------------
2.4.1.1 Operation. Gulf States, TriNet and Hart are jointly
---------
responsible for operation of the Gulf/TriNet/Hart Ring.
2.4.1.2 Management. Gulf States is responsible for management of
----------
the Gulf/TriNet/Hart Ring.
2.4.1.3 Sale of Capacity. Gulf States, TriNet and/or Hart may sell
----------------
capacity on the Gulf/TriNet/Hart Ring. Gulf States agrees,
at its own expense, to use reasonable efforts to market and
sell capacity on the Gulf/TriNet/Hart Ring, and, to the
extent Gulf, TriNet and Hart may agree, on the TriNet/Hart
Ring. Gulf States agrees to provide such personnel, and
cause them to devote such time, as may reasonably be
required to make these efforts effective.
2.4.2 TriNet/Hart Ring. TriNet and Hart agree to enter into an agreement
----------------
with respect to management, operation and sale of capacity on the
TriNet/Hart Ring and to abide by the terms and conditions of that
agreement. Subject to the TriNet/Hart Agreement, TriNet and Hart are
jointly responsible for the management, operation and sale of
capacity of the TriNet/Hart Ring.
2.4.3 MPX Diversity Route. MPX is responsible for the management,
-------------------
operation and sale of capacity of the MPX Diversity Route.
2.5 Sale of Capacity Between Parties.
--------------------------------
2.5.1 On the Network. Subject to Section 2.4 above, a Party may sell
--------------
capacity on the Network to another Party. The selling Party shall
charge its then existing Prevailing Carrier's Carrier Rates for
capacity on the Network.
2.5.2 Off-Network. Gulf States agrees to sell TriNet and Hart capacity on
-----------
the Gulf States Network or Interstate FiberNet. Subject to further
agreement, TriNet and Hart each agree to sell off-network capacity
in its respective service area to Gulf States. The charges for any
such sale of capacity under this provision shall be each Party's
then existing Prevailing Carrier's Carrier Rates for the same
service.
2.6 Compensation Sharing Mechanisms. Gulf States, TriNet and Hart agree to
-------------------------------
enter into the Revenue Sharing Agreement incorporated herein as Exhibit D,
with respect to capacity sold by Gulf States on the Gulf/TriNet/Hart Ring.
Gulf States, TriNet and Hart agree that, before TriNet or Hart sells
capacity on the Gulf/TriNet/Hart Ring, Gulf States, TriNet and Hart will
agree as to an appropriate mechanism for Gulf States to share in that
revenue. The Parties agree that any such additional compensation sharing
mechanism shall be incorporated into this Agreement as an additional
exhibit.
Page 7
<PAGE>
SECTION 3 PROVISION OF PHYSICAL FACILITIES
--------------------------------
Except as otherwise specified herein, the Parties agree to make the following
Physical Facilities available for use in the Network at a time sufficient to
enable each of the component rings or route of the Network to become operational
as soon as practicable.
3.1 Gulf States. Gulf States agrees to provide use of or access to the
-----------
following Physical Facilities for use in the Network pursuant to the
Operating Standards:
3.1.1 Four (4) Dark Fibers connecting Winder and Gainesville for use in
the MPX Diversity Route;
3.1.2 Two (2) Fibers connecting Winder and Gainesville for use in the
Gulf/TriNet/Hart Ring;
3.1.3 After the initiation of operation on the Gulf/TriNet/Hart Ring, and
pursuant to reaching agreement with TriNet and Hart, two (2)
additional Fibers connecting Winder and Gainesville for use in the
Gulf/TriNet/Hart Ring;
3.1.4 Two (2) Fibers connecting Winder and Gainesville for use in the
TriNet/Hart Ring;
3.1.5 Operational Space at Gainesville for use of the Gulf/TriNet/Hart
Ring, the TriNet/Hart Ring and the MPX Diversity Route;
3.1.6 Operational Space at Winder for use of the Gulf/TriNet/Hart Ring,
the TriNet/Hart Ring and the MPX Diversity Route;
3.1.7 One (1) 0C-48 ADM at Gainesville for use in the Gulf/TriNet/Hart
Ring; and
3.1.8 One (1) OC-48 ADM at Winder for use in the Gulf/TriNet/Hart Ring.
3.2 TriNet. TriNet agrees to provide use of or access to the following Physical
------
Facilities for use in the Network pursuant to the Operating Standards:
3.2.1 Four (4) Dark Fibers connecting Gainesville and Toccoa for use in
the MPX Diversity Route;
3.2.2 Two (2) Fibers connecting Gainesville and Toccoa for use in the
Gulf/TriNet/Hart Ring;
3.2.3 After the initiation of operation on the Gulf/TriNet/Hart Ring and
pursuant to agreement with Gulf and Hart, two (2) additional Fibers
connecting Gainesville and Toccoa for use in the Gulf/TriNet/Hart
Ring;
3.2.4 Two (2) Fibers connecting Gainesville and Toccoa for use in the
TriNet/Hart Ring;
3.2.5 Operational Space for Equipment between Gainesville and Toccoa for
use of the MPX Diversity Route and the Gulf/TriNet/Hart Ring;
3.2.6 Operational Space at Toccoa for use in Gulf/TriNet/Hart Ring and the
MPX Diversity Route;
Page 8
<PAGE>
3.2.7 A minimum of one (1) 0C-48 Terminal at the Carolina Fibernet
Interface at Toccoa for use in the Gulf/TriNet/Hart Ring; and
3.2.8 Subject to reaching agreement with Gulf States and Hart, 0C-48 Regen
Equipment, as needed, between Gainesville and Toccoa for use in the
Gulf/TriNet/Hart Ring.
3.3 Hart. Hart agrees to provide use of or access to the following Physical
----
Facilities for use in the Network pursuant to the Operating Standards:
3.3.1 Four (4) Dark Fibers connecting Toccoa and Hartwell for use in the
MPX Diversity Route;
3.3.2 Two (2) Fibers connecting Toccoa and Hartwell for use in the
Gulf/TriNet/Hart Ring;
3.3.3 After initiation of operation on the Gulf/TriNet Hart Ring and
pursuant to agreement with Gulf and TriNet, two (2) additional
Fibers connecting Toccoa and Hartwell for use in the
Gulf/TriNet/Hart Ring; and
3.3.4 Two (2) Fibers connecting Toccoa and Hartwell for use in the
TriNet/Hart Ring.
3.3.5 A minimum of one (1) 0C-48 Terminal at the Carolina FiberNet
Interface at Hartwell for use in the Gulf/TriNet/Hart Ring.
3.4 MPX. MPX agrees to provide use of or access to the following Physical
---
Facilities for use in the Network pursuant to the Operating Standards:
3.4.1 Two (2) Dark Fibers connecting Winder and Hartwell for use in the
Gulf/TriNet/Hart Ring;
3.4.2 Two (2) Dark Fibers connecting Winder and Hartwell for use in the
TriNet/Hart Ring;
3.4.3 Operational Space from Atlanta to Hartwell, as necessary, for use in
the Gulf/TriNet/Hart Ring and in the TriNet/Hart Ring; and
3.4.4 All Physical Facilities not otherwise specified in this Section 3
that are required for operation of the Gulf States/TriNet/Hart Ring
and the TriNet/Hart Ring.
3.5 TriNet and Hart.
---------------
Subject to the TriNet/Hart Agreement, TriNet and Hart agree to provide all
Physical Facilities not otherwise specified in this Section 3 that are
required for operation of the TriNet/Hart Ring.
SECTION 4 DARK FIBER LEASE OPTION BETWEEN TRINET, HART AND MPX
----------------------------------------------------
4.1 Options. In addition to the provision of Physical Facilities discussed in
-------
Section 3 above, TriNet and Hart each grant to MPX the following options to
lease additional Dark Fiber:
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4.1.1 TriNet. TriNet grants an option to MPX throughout the initial Term
------
and any Supplemental Term of this Agreement to lease from TriNet
the use of up to two (2) Dark Fibers connecting Gainesville and
Toccoa for the MPX Diversity Route.
4.1.2 Hart. Hart grants an option to MPX throughout the Initial Term and
----
any Supplemental Term of this Agreement, to lease from Hart the use
of up to two (2) Dark Fibers connecting Toccoa and Hartwell for the
MPX Diversity Route.
4.2 Exercise of Option. To exercise an option pursuant to this Section 4, MPX
------------------
shall notify TriNet and/or Hart, as the case may be, in writing, of its
intention to exercise a lease option and the extent of the exercise. Such
notice shall be given at least sixty (60) days prior to the date on which
MPX intends to initiate service on the particular fiber(s).
4.3 Dark Fiber Lease Form. If MPX exercises an option pursuant to this
---------------------
Section 4, it shall execute a Dark Fiber Lease with TriNet or Hart, as the
case may be, in the form attached hereto as Exhibit C.
SECTION 5 OPERATING STANDARDS
-------------------
5.1 Obligation to Comply With Operating Standards. Each Party agrees that it
---------------------------------------------
will use all commercially reasonable efforts to ensure that the Physical
Facilities it provides for and the services it provides over the Network
conform to the Operating Standards of this Section and Exhibits E and F
hereto.
5.2 Operations Manual. Each Party agrees to adhere to the standards and other
-----------------
obligations stated in the Operations Manual, attached hereto as Exhibit E.
Each Party acknowledges receipt of the Operations Manual in effect on the
day this Agreement is signed, and Gulf States agrees to provide all Parties
with adequate notice of revisions to the manual.
5.3 Intermediate POPs and Regenerator Stations. The location of Intermediate
------------------------------------------
POPs and Regenerator Stations will be determined at the sole discretion of
the Party that has provided that portion of the Network on which the
intermediate POP or Regenerator Station is located provided that such
location permits operation in conformance with the Operating Standards.
Each Party agrees to designate Intermediate POPs or Regenerator Stations if
the addition is required to comply with the Operating Standards. A Party
that designates an intermediate POP or Regenerator Station is responsible
for providing all Operational Space and/or Equipment at any such
location(s) that is necessary for Network operation in conformance with the
Operating Standards. Each Party must notify the other Parties at least
thirty (30) days before initiating operation at a new Intermediate POP or
Regenerator Station or ceasing Network use of an Intermediate POP or
Regenerator Station. Such notice shall include Engineering Minimums for any
new location and shall become part of Exhibit F hereto.
5.4 Engineering Minimums for POPs, Intermediate POPs, Regenerator Stations. The
----------------------------------------------------------------------
Parties agree that they will adhere to the Engineering Minimums stated in
Exhibit F. Each Party will maintain current information as listed in
Exhibit F for its POPs, Intermediate POPs and Regenerator Stations. In
addition to the Engineering Minimums stated in Exhibit F, all Parties are
responsible for meeting any other industry standard requirements for the
installation,
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operation and maintenance of long-haul fiber-optic transmission systems,
e.g., maximum 5 ohm earth ground at each site.
----
5.5 Interface to Carolina Fibernet. TriNet, with respect to Toccoa, and Hart,
------------------------------
with respect to Hartwell, agree to provide adequate interface to Carolina
Fibernet for the Gulf/TriNet/Hart Ring that complies with the Operating
Standards, and, if any additional agreement with Carolina FiberNet is
necessary, each agrees to take all commercially reasonable measures to
enter into such agreement.
5.6 Maintenance Standards. Each Party shall be solely responsible for
---------------------
maintaining the Physical Facilities it provides for use in the Network in a
manner consistent with the Operating Standards. Each Party agrees to
maintain its Physical Facilities in conformance with the Operating
Standards, in good working condition, reasonable wear and tear excepted,
and, to the extent reasonable, without service interruption.
5.7 Equipment Compatibility and Interconnection. The Parties agree that the
-------------------------------------------
interconnections of Physical Facilities necessary to establish the Network,
as well as the interconnections between the Network and any other network
or carrier, shall be in accordance with accepted industry standards and the
Operating Standards.
5.8 Service Interruption.
--------------------
5.8.1 Service Interruption and Allowances Generally. The Parties
---------------------------------------------
acknowledge and agree that service interruptions and associated
allowances are subject to varying customer definitions and
quantification's, and that each Party providing service on the
Network will be individually responsible for allowances or credits
for the benefit of a customer affected by a service interruption
according to the specific customer contract. Further, the Parties
agree that they will not be liable to each other for service
interruptions that occur on the Network, except on Circuits that are
subject to revenue sharing, or another compensation mechanism
pursuant to Section 2.6 above. With respect only to Circuits that
are subject to revenue or compensation sharing, the Parties involved
will share pro rata the cost of allowances or credits resulting from
service interruption. For example, if a service interruption on a
given circuit results in a credit of twenty percent (20%) of the
monthly circuit price, then the billing Party will issue the twenty
percent (20%) credit to its customer, and the revenue or
compensation shares associated with that Circuit will be reduced by
twenty percent (20%) for that month.
5.8.2 Obligation to Restore Service. In the event that any Party becomes
-----------------------------
aware that any of its Physical Facilities has caused a service
interruption, that Party shall immediately notify the other Parties
and promptly take all reasonable steps necessary to restore service,
including repair or replacement of the affected Physical Facilities.
SECTION 6 ADMINISTRATION OF THE GULF/TRINET/HART RING
-------------------------------------------
6.1 Books and Records. Gulf States, TriNet and Hart each shall keep, or cause
-----------------
to be kept, full and complete books, records and accounts with respect to
its traffic or the traffic of its customers over the Gulf/TriNet/Hart Ring.
Such books, records, and accounts shall be retained for a period of five
(5) years after the expiration or termination of this Agreement.
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6.2 Inspection and Audit. Gulf States, TriNet and Hart shall, at their own,
--------------------
individual expense, each have access to each other's books, records and
accounts at any reasonable time during normal business hours, upon five (5)
business days' prior written notice, for the purpose of conducting an
inspection or audit or such books, records and accounts to verify the
accuracy of the amounts paid to TriNet and/or Hart by Gulf States pursuant
to the Revenue Sharing Agreement or amounts paid to Gulf States by TriNet
and/or Hart pursuant to a future compensation sharing arrangement entered
into pursuant to Section 2.6 above. This obligation to permit inspection
and audit of books, records, and accounts shall extend to only those books,
records, and accounts that relate to operation of the Gulf/TriNet/Hart
Ring, and not to any other aspect of a Party's business operations.
6.3 Revenue and Traffic Projections.
-------------------------------
6.3.1 Obligation to Provide Estimates. Every six (6) months, or at such
-------------------------------
other interval as Gulf States, TriNet and Hart may agree, any of
these three Parties that is selling capacity on the Gulf/TriNet/Hart
Ring will provide to the other two written estimates of that Party's
traffic demands and number of customers on the Gulf/TriNet/Hart Ring
for the twelve-(12-) month period beginning on the date the estimate
is provided. The estimate shall include revenue to be allocated to
other Parties to the Gulf/TriNet/Hart Ring pursuant to the Revenue
Sharing Agreement or another compensation-sharing mechanism adopted
pursuant to Section 2.6 above. The first set of projections for
traffic on the Gulf/TriNet/Hart Ring will be due within thirty (30)
days after the signing of this Agreement.
6.3.2 DSl/DS3 Price Floors and OC-N Pricing. Gulf States, TriNet and Hart
-------------------------------------
agree that: (i) on at least an annual basis and prior to the time
that each of them initiates service on the Gulf/TriNet/Hart Ring,
they will agree on a minimum acceptable price for DS1 and DS3
circuits for such Party's service (each, a "Price Floor"); (ii) with
respect to OC-N pricing, Gulf States must obtain TriNet's and Hart's
approval for all OC-N (OC-3, 12, 24, etc.) system pricing and
service terms prior to accepting an order for such a system, and
TriNet and Hart will not unreasonably withhold approval of such
system pricing and service terms; (iii) they may agree to revise a
Price Floor at any time; and (iv) the intent of setting Price Floors
for services provided on the Gulf/TriNet/Hart Ring is to ensure that
TriNet and Hart will each receive compensation for all circuits
incorporated by the Revenue Sharing Agreement and to provide Gulf
States, TriNet and Hart with a reasonable cash flow and reasonable
return on investment in the Network.
6.3.3 Obligation to Correct Estimates. If, subsequent to providing these
-------------------------------
estimates, a Party becomes aware of information that, in that
Party's view, reasonably suggests that any estimate provided under
this Section may no longer be accurate and that actual traffic
and/or revenues may either exceed, or fail to reach, the estimated
levels provided in its most recent estimate by twenty-five percent
(25%) or more, the Party shall immediately so advise the other two
Parties to the Gulf/TriNet/Hart Ring, as soon as practicable, and
provide revised estimates reflecting the revised information
concerning projected traffic and revenue.
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SECTION 7 REGULATORY APPROVALS
--------------------
Each Party is responsible for obtaining and maintaining all federal, state, or
local regulatory approvals or other governmental authorizations necessary to
construct and operate the Network as described herein. Each Party providing
service on the Network shall be responsible for complying with all regulatory
requirements pertaining to the provision of those services, including without
limitation all tariffing requirements. If any regulatory approval for the
Network as an entity is required, the Parties will agree regarding assigning
responsibility for obtaining and maintaining any such approval.
SECTION 8 REPRESENTATIONS AND WARRANTIES
------------------------------
Each Party represents and warrants to the other Parties as follows:
8.1 Organization; Good Standing; Qualification. It is a corporation or
------------------------------------------
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, it has all
requisite corporate or partnership power and authority to carry on its
business as now conducted, and it is duly qualified and in good standing to
do business in Georgia and all other states where it presently does
business.
8.2 Corporate Power; Authorization; Enforceable Obligations. It has the
-------------------------------------------------------
corporate power, authority and legal right to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement,
and all other agreements and documents contemplated hereby, has been duly
authorized by all necessary corporate or partnership action of such Party,
has not been modified or rescinded, and will not: (i) conflict with or
violate any provision of the organizational documents of such Party, or
(ii) conflict with, breach or constitute a default under any contractual
obligation of such Party. No other corporate or partnership action is
necessary for such Party to enter into and perform under this Agreement and
all other agreements and documents contemplated hereby.
8.3 Due Execution and Binding Effect. It has duly executed this Agreement and
--------------------------------
all other documents to be executed hereunder and all are valid and binding
obligations of such Party, enforceable in accordance with their terms.
8.4 Compliance with Law; Regulatory Authority. It will comply with all material
-----------------------------------------
provisions of applicable federal, state and local laws and regulations,
including without limitation (i) the Communications Act of 1934, as
amended, (ii) the policies, rules and regulations of the Federal
Communications Commission, (iii) Chapter 5 of the Georgia Public Utilities
Law, Ga. Code (S)46-5-1 et seq., and (iv) the policies, rules and
regulations of the Georgia Public Service Commission. Also, execution of
this Agreement and performance hereunder will not violate any legal
requirement applicable to that Party, and it knows of no governmental
proceeding that might restrict the transactions contemplated by this
Agreement.
8.5 No Material Misrepresentation or Omission. With respect to all
-----------------------------------------
communications between the Parties to date and in the future regarding this
Agreement, including regarding the provisions of this Agreement, to the
best of its knowledge, information and belief (i) it has not made, and will
not make, any untrue statement of a material fact, and (ii) it has not
omitted, and will not omit, to state a material fact necessary to make a
statement or fact contained herein or therein not misleading.
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8.6 Ownership of and Access to Physical Facilities. It has title and/or
----------------------------------------------
interest in, or will at the appropriate time have title or interest in,
including adequate rights of way with respect to, the Physical Facilities
that it will provide or lease for use in the Network. It knows of no reason
why it cannot, or will not be able to, provide adequate access to any of
the Physical Facilities that it will provide or lease for use in the
Network.
8.7 Claims and Encumbrances. There are no claims or encumbrances on the
-----------------------
Physical Facilities it will provide or lease that could materially affect
the operation of the Network, or any ring or route thereof, as provided
under this Agreement.
8.8 Condition of Physical Facilities. The Physical Facilities that it will
--------------------------------
provide or lease to the Network will be, and will remain, of a quality and
condition consistent with communications industry standards, applicable
government regulations, sound business practices, and the Operating
Standards set forth in Section 5 and Exhibits E and F of this Agreement.
SECTION 9 ADDITIONAL COVENANTS
--------------------
9.1 Notice of Action or Proceeding. Each Party agrees to notify the other
------------------------------
Parties within five (5) business days of learning of any pending or
threatened action or proceeding by or before any governmental authority
that might restrain, prohibit or invalidate the transactions contemplated
by this Agreement. Each Party will cooperate with the other Parties in
connection with any such action or proceeding, and will permit any other
Party to participate, at such Party's expense, in any such pending or
threatened action or proceeding for the purpose of enforcing the rights
conferred and obligations imposed by this Agreement.
9.2 Claims and Encumbrances. Each Party agrees that it will keep its Physical
-----------------------
Facilities free from any claim or encumbrance that could materially affect
the operation of the Network as set forth by this Agreement. If any such
claim or encumbrance arises, each Party immediately will inform all other
Parties and, at its own expense, take all steps necessary to remove the
claim or encumbrance.
9.3 Access to Physical Facilities. Each Party agrees that it will provide
-----------------------------
reasonable access to the other Parties to the Physical Facilities of the
Network to permit operation, inspection, repair, maintenance and, if
applicable, removal of Equipment.
9.4 Further Assurances. Each Party agrees to take all additional actions, or
------------------
cause all additional actions to be taken, as may be required for full
effectuation of this Agreement. In addition, to the extent consistent with
its rights and responsibilities set forth in this Agreement, each Party
shall act to promote and further the best interests of the Network
generally. This shall include the responsibility to share information
relevant to the performance and operation of the Network and the right, but
not the obligation, to provide additional capacity on the Network to meet
increased demand through the provision of additional facilities, space
and/or equipment beyond that specified herein.
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SECTION 10 EXPENSES
--------
Except to the extent specifically provided elsewhere in this Agreement, each
Party will bear the costs and expenses associated with its participation in and
performance under this Agreement, including without limitation (i) the cost to
initiate and maintain operation of the Network and to obtain and maintain any
permit or license required for installation, modification or removal of Physical
Facilities; (ii) all applicable federal, state and local income, sales, use,
excise and ad valorem taxes; (iii) removing claims and encumbrances on Physical
Facilities; and (iv) all costs of employee compensation.
SECTION 11 DISPUTE RESOLUTION
------------------
11.1 Negotiation; Arbitration; Georgia Jurisdiction. The Parties agree that
----------------------------------------------
they will attempt to resolve all claims, disputes and other matters in
question between them under this Agreement by good faith negotiation. Any
claim, dispute or other matter arising out of this Agreement or relating
to the subject matter of this Agreement that cannot be resolved between
the Parties shall be decided by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
("AAA Rules") then in effect. This Agreement to arbitrate shall be
specifically enforceable under the prevailing arbitration law of any court
having jurisdiction, and each Party hereby consents to the exclusive
jurisdiction of the courts of the State of Georgia in any action or
proceeding with respect to this Agreement. Such arbitration may also
include other parties under contract with the Parties concerning the
matters within this Agreement where issues or claims are related. All
arbitration shall be conducted in Atlanta, Georgia.
11.2 Commencement; Selection of Arbitrator; Award. Notice of the demand for
--------------------------------------------
arbitration shall be filed in writing with the other Parties to this
Agreement and three (3) copies of the notice and three (3) copies of this
Section 11, together with the appropriate filing fee, shall be filed with
the AAA after the claim, dispute or other matter in question has arisen.
In no event shall any such demand be made when institution of legal or
equitable proceedings based on such claim, dispute or other matter in
question would be barred by the applicable statute of limitation. No
notice to arbitrate in respect to a specifically described claim,
counterclaim, dispute or other matter in question will constitute notice
or consent to arbitrate any other claim, counterclaim, dispute or other
matter in question that is not specifically described in such notice. An
arbitrator who specializes in telecommunications issues shall be selected
by agreement of the Parties to the dispute pursuant to the AAA Rules. If,
however, the Parties to the dispute do not agree on an arbitrator within
twenty (20) days after the date of the notice, the selection of the
arbitrator shall be made pursuant to the AAA Rules from the list of the
National Panel of Commercial Arbitrators maintained by the AAA. Each
arbitration under this Agreement will be completed as expeditiously as
possible under the AAA rules. The award rendered by the arbitrator shall
be final.
11.3 Enforceability. Judgment may be entered on the arbitration award in a
--------------
court having jurisdiction thereof and shall not be subject to modification
or appeal except to the extent permitted under the AAA Rules.
11.4 Expenses. Each Party to the dispute shall pay its own expenses of
--------
arbitration and its pro rata share of the arbitrator's expenses. If, in
the opinion of the arbitrator, any claim, defense, or objection was
unreasonable, the arbitrator may assess, as part of the award, all or any
part of
Page 15
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the arbitration expenses of another Party (including reasonable attorneys'
fees) and/or of the arbitrator against the Party raising the unreasonable
claim, defense or objection.
SECTION 12 INDEMNIFICATION AND LIABILITY
-----------------------------
12.1 General Indemnification Obligation. Subject to the terms and conditions of
----------------------------------
Section 11 above regarding Dispute Resolution and Section 15 below
regarding Force Majeure, during the term of this Agreement, each Party
(the "Indemnifying Party") shall reimburse, indemnify, defend and hold
harmless the other Parties and their respective employees, directors,
officers and agents (the "Indemnified Party") with respect to:
12.1.1 all damages, losses, deficiencies, liabilities, costs and expenses
incurred by any Indemnified Party that relate to or arise out of:
(i) the Indemnifying Party's breach or noncompliance with
respect to any representation, warranty or covenant
contained in this Agreement, except for those costs and
other obligations that the Indemnified Party specifically
assumes pursuant to this Agreement;
(ii) all damage to the Physical Facilities provided by the
Indemnified Party when such damage is caused by the
negligence or gross negligence of the Indemnifying Party or
any of its directors, officers, employees, agents,
representatives or subcontractors;
(iii) and all actions, suits, claims, demands or legal,
administrative, arbitration, governmental or other
proceedings by a third party against any Indemnified Party
which result from or arise out of any action or inaction,
during the term of this Agreement, of the Indemnifying
Party or any director, officer, employee, agent,
representative or subcontractor of such Indemnifying Party;
or
12.1.2 all actions, suits, claims, proceedings, investigations, demands,
assessments, fines, judgments, costs and other expenses
(including, without limitation, reasonable attorneys' fees and
expenses) incident to any of the foregoing or to the enforcement
of this Section 12.1.
12.2 Method of Asserting Claims.
--------------------------
12.2.1 Third Party Claims. If any claim or demand for which the
------------------
Indemnifying Party would be liable to an Indemnified Party under
this Agreement is asserted against an Indemnified Party (each, a
"Claim") by a third party, the Indemnified Party shall promptly
after identifying the Claim, notify the Indemnifying Party of such
Claim, specifying the nature of such Claim and the amount, or a
reasonable estimate, of such Claim (which estimate shall not be
conclusive of the final amount of such claim and demand) (the
"Claim Notice"). The Indemnifying Party shall have twenty (20)
days from receipt of the Claim Notice (the "Claim Notice Period")
to notify the Indemnified Party whether or not it disputes its
liability to the Indemnified Party under this Agreement with
respect to such Claim. If the
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Indemnifying Party disputes its liability with respect to such
Claim or the amount of such Claim, such dispute shall be resolved
in accordance with Section 11 of this Agreement and the
Indemnified Party shall continue to defend or otherwise prosecute
the Claim and to keep the Indemnifying Party advised of the
status of such Claim.
12.2.2 Control of Defense or Settlement. Unless the Indemnifying Party
--------------------------------
has disputed its liability under Section 12.2.1 above, the
Indemnifying Party shall have the right to control the defense or
settlement of any such Claim by notifying the Indemnified Party
within the Claim Notice Period; provided, however, that the
Indemnifying Party shall not settle any such Claim without the
prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld or delayed. If the Indemnified
Party desires to participate in any such defense or settlement,
it may do so as its sole cost and expense.
12.2.3 Other Claims. If an Indemnified Party has a Claim against an
------------
Indemnifying Party that has not been asserted by a third party,
the Indemnified Party shall promptly send a Claim Notice with
respect to such Claim to the Indemnifying Party. If the
Indemnifying Party disputes its liability with respect to such
Claim, it must so notify the Indemnified Party within the Claim
Notice Period, and the dispute shall be resolved in accordance
with Section 11 of this Agreement. If the Indemnifying Party does
not timely notify that it disputes such Claim, the Claim shall be
conclusively deemed a liability of the Indemnifying Party.
12.3 Payment. When either a final and non-appealable judgment of liability, a
-------
settlement and/or a release of claims is obtained, the Indemnifying Party
shall pay to the Indemnified Party, within twenty (20) days after such
event, the amount of any Claim for indemnification made under this
Agreement. Payment shall be by wire transfer or immediately available
funds as the Indemnified Party may designate. Upon the payment in full of
any Claim, the Indemnifying Party shall be subrogated to the rights of
the Indemnified Party against any person, firm or corporation with
respect to the subject matter of such Claim.
12.4 Liability.
---------
12.4.1 Service Interruption. Liability for service interruption is
--------------------
governed by Section 5 above.
12.4.2 No Liability. No Party shall be liable to another Party for any
------------
indirect, consequential, special, incidental or punitive damages,
or for lost profits, related to this Agreement.
SECTION 13 SPECIFIC PERFORMANCE
--------------------
The Parties agree that the subject matter of this Agreement is unique, that
money damages would not be a sufficient remedy for any breach of this Agreement,
and that each Party shall be entitled to specific performance and injunctive or
other equitable relief as a remedy for any such breach. Such remedy shall not be
deemed to be the exclusive remedy for breach of this Agreement, but shall be in
addition to all other remedies to the Parties available under this Agreement.
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SECTION 14 TERM, TERMINATION AND BREACH
-----------------------------
14.1 Term. The term of this Agreement commences on the date of full execution
----
and, unless earlier terminated in accordance with this Section, will
continue for ten (10) years (the "Initial Term"). The Agreement may renew
for two Supplemental Terms of five (5) years each pursuant to the written
agreement of all Parties. The Parties shall discuss whether to renew at
least one hundred eighty (180) days prior to the expiration of each term.
14.2 Breach. If a Party breaches this Agreement, any other Party may notify
------
the breaching Party of the breach and request that the breaching Party
cure the breach. The breaching Party shall have ten (10) days from
receipt of such notification to cure the breach or, if the breaching
Party and the notifying Party agree that such breach cannot be cured
within the ten- (10-) day period, such longer period as may be necessary
to cure such breach, so long as the breaching Party is diligently
pursuing cure ("Cure Period"). The Parties acknowledge that time is of
the essence with respect to breach and cure. During any Cure Period, the
breaching Party shall periodically inform the other Parties of the status
of the attempt to cure.
14.3 Termination. This Agreement may be terminated only for failure to cure a
-----------
Material Breach (as defined below) or by written agreement of three (3)
Parties.
14.3.1 Failure to Cure Material Breach. If a Party falls to cure a
-------------------------------
Material Breach within a reasonable Cure Period, any two (2)
other Parties may terminate the Agreement by notifying all other
Parties ("Termination Notice"). A Termination Notice shall state
the basis for the termination and a Termination Date, which may
be the date on the Termination Notice.
14.3.2 Material Breach Defined. For purposes of this Agreement, breach
of Sections 3, 5, 7, and 16 shall constitute Material Breach. All
other breaches shall be non-material, unless the breach has a
significant adverse effect, or is likely to significantly and
adversely effect, the ability of another Party to exercise
rights, receive benefits or perform obligations under this
Agreement.
14.4 Effect of Expiration or Termination. On expiration or complete
-----------------------------------
termination of this Agreement, the Parties will agree on a schedule,
requiring no more than thirty (30) days, for disconnecting the Physical
Facilities, removing Equipment, restoring Operational Space to its former
condition and paying any outstanding money obligations, such as revenue
sharing and claims for indemnification ("Disconnect Period"). Each Party
will bear its own expenses to accomplish these tasks. After the
Disconnect Period, this Agreement shall be of no further force or effect,
and no Party shall be liable to another Party, except pursuant to the
terms that survive, which are listed in Section 18.3 below.
SECTION 15 FORCE MAJEURE
-------------
If a Party's full performance of its obligations under this Agreement is
prevented by a cause beyond its reasonable control, the Party shall be excused
from performance on a day-to-day basis to the extent of the disability. Causes
constituting such prevention under this Section include, without limitation,
acts of God, fire, explosion, vandalism, weather conditions, insurrection, riot,
war, or any governmental
Page 18
<PAGE>
requirement. A Party excused from performance based on this Section shall use
all commercially reasonable efforts under the circumstances to avoid or remove
the cause of nonperformance, and is obligated to perform when the cause no
longer prevents performance.
SECTION 16 INTANGIBLE PROPERTY
-------------------
16.1 Confidential Information. "Confidential Information" means (i) all
------------------------
confidential, proprietary or secret information of the disclosing Party
other than "Trade Secrets" (as defined below) that is of intangible or
tangible value to the disclosing Party, that is neither public
information nor generally known or available to the disclosing Party's
competitors, but rather is known or available only to the disclosing
Party and its employees, independent contractors, customers or agents to
whom such information must be confided to apply it to the uses intended
(including, without limitation, any customer or lead lists and other
customer information regarding the disclosing party's customers or
potential customers). Confidential Information shall not include (i)
information in the public domain (other than as a result of unauthorized
disclosure by the receiving Party or someone to whom the receiving Party
has disclosed the information), (ii) information previously known by the
receiving Party on a non-confidential basis, and (iii) information
disclosed by a third party with no confidential obligations associated
therewith. Each Party is responsible for clearly identifying information
over which it claims confidentiality under this Section 16.
16.2 Intangible Property. "Intangible Property" means the Confidential
-------------------
Information, the Marks (as defined below) and the Trade Secrets, whether
or not all or any portion thereof is or may be validly copyrighted,
patented or registered as a trademark or service mark.
16.3 Marks. "Marks" means each Party's corporate name, service marks,
-----
trademarks, trade names, insignias, symbols, decorative designs and
slogans and the trademarks and service marks of each Party's Affiliates,
both presently existing or hereafter created or used, whether each Party
owns, uses or is licenses or sublicenses to use the same.
16.4 Trade Secrets. "Trade Secrets" means information related to the business
-------------
or services of the disclosing Party that (i) derives economic value,
actual or potential from not being generally known to or readily
ascertainable by other persons who can obtain economic value from its
disclosure or use; and (ii) is the subject of efforts by the disclosing
Party that are reasonable under the circumstances to maintain its
secrecy, including without limitation (a) marking any information reduced
to tangible form clearly and conspicuously with a legend identifying its
confidential or proprietary nature; (b) identifying any oral presentation
or communication as confidential immediately before, during or after such
oral presentation or communication; or (c) otherwise treating such
information as confidential. Assuming the criteria in (i) and (ii) above
are met, Trade Secrets, include without limitation, technical and non-
technical data related to the designs, programs, inventions, finances,
actual or potential customers and suppliers, research, development,
marketing, existing and future products and employees of the disclosing
Party.
16.5 Obligation and Acknowledgments. Each Party agrees to provide the other
------------------------------
Parties such information as shall be reasonably necessary to permit the
other party to perform its obligations hereunder. In addition to any
obligation to provide information that is Confidential Information, the
Parties acknowledge and agree that: (i) they may become aware of each
other's Confidential
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<PAGE>
Information and/or Trade Secrets in the course of this Agreement; (ii)
each Party's Intangible Property represents a substantial investment by
that Party; (iii) each Party's Intangible Property is secret,
confidential and unique; (iv) at least as between the disclosing Party
and the receiving Party, the disclosing Party is the sole owner of all
right, title and interest in and to the Intangible Property; (v) any
right the receiving Party has to use the Intangible Property is derived
solely from this Agreement; (vi) this Agreement; (vi) this Agreement does
not confer upon the receiving Party any rights, goodwill or other
interests in any of the Intangible Property; (vii) any disclosure or use
of the Intangible Property, except as otherwise authorized by the
Disclosing Party in writing, or any other violation of the provisions of
this Section 16, would be wrongful and cause immediate, significant,
continuing and irreparable injury and damage to the disclosing Party that
is not fully compensable by monetary damages; and (viii) notwithstanding
Section 11 above regarding Dispute Resolution, should the receiving Party
breach or threaten to breach any provision of this Section 16, the
disclosing Party shall be entitled to obtain immediate relief and
remedies in a court of competent jurisdiction, cumulative of and in
addition to any other rights or remedies to which the disclosing Party
may be entitled by this Agreement.
16.6 Treatment of Intangible Property. During the term of this Agreement, and
--------------------------------
thereafter as provided in this Agreement, a receiving Party shall regard
and treat a disclosing Party's Intangible Property as strictly
confidential and wholly owned by the disclosing Party. The receiving
Party shall exercise its best efforts to ensure the continued
confidentiality and ownership by the disclosing Party of all Intangible
Property known by or disclosed or made available to the receiving Party,
its employees or Affiliates. The receiving Party shall cooperate with any
additional confidentiality and other similar, reasonable requirements the
disclosing Party may establish from time to time for the protection of
the Intangible Property. The receiving Party shall not, during the term
of this Agreement or thereafter, (i) claim any interest in or attack the
title or any rights of the disclosing Party in or to any or all of the
disclosing Party's Intangible Property or (ii) take any action that would
adversely affect the disclosing Party's rights therein, or (iii) remove,
alter or obfuscate (or permit the removal, alteration or obfuscation of)
any of the Marks on any property owned or licensed by the disclosing
Party. The receiving Party shall be liable to the disclosing Party for
any actual proved damages resulting from the unauthorized disclosure of
the disclosing Party's Intangible Property by the receiving Party's
employees or Affiliates.
16.7 Use of Marks. The receiving Party shall use the Marks of the disclosing
------------
Party only with such notices of proprietary rights, ownership or
registration and such words qualifying or identifying the relationship of
the disclosing Party and the Receiving Party. The receiving Party shall
not use any of the Marks of the disclosing Party, or any material portion
thereof, as a part of the receiving Party's corporate or trade name or
with any prefix, suffix or other modifying words, terms, designs or
symbols, or in any modified form.
16.8 Non-Disclosure. At all times during the term of this Agreement and: (i)
--------------
with respect to any Confidential Information, for two (2) years after any
expiration or termination hereof; and (ii) with respect to each item of
Trade Secrets, for such time as such item shall constitute a trade secret
under applicable law, the receiving Party and its Affiliates shall
maintain another Party's Confidential Information and Trade Secrets in
strict confidence, and neither the receiving Party nor any of its
Affiliates shall, for any reason, in any form or manner, whether directly
or indirectly: (a) sell, lend, lease, distribute, market, license,
sublicense, give, transfer, assign, show, divulge, disclose, disseminate
or otherwise communicate another Party's Confidential Information or
Trade Secrets to any third party; or (b) use another Party's Confidential
Page 20
<PAGE>
Information or Trade Secrets for any purpose other than the purposes of
this Agreement; or (c) keep another Party's Confidential Information or
Trade Secrets in any form after the expiration or any termination of this
Agreement; or (d) duplicate, reproduce, copy, distribute, disclose or
disseminate another Party's Confidential Information or Trade Secrets.
SECTION 17 OTHER VENTURES
--------------
This Agreement is non-exclusive. Each Party may undertake other business
ventures of any nature, and may conduct all activities, including in connection
with communications services, except as specifically limited in this Agreement.
SECTION 18 GENERAL PROVISIONS
------------------
18.1 Amendment. This Agreement may not be amended except in writing signed by
---------
all Parties; provided, however, that (i) the Revenue Sharing Agreement
and provisions of this Agreement that relate to the revenue sharing
arrangement between Gulf States, TriNet and Hart may be amended only by a
writing signed by those Parties, and (ii) a Dark Fiber Lease may be
amended only by a writing signed by the parties to the particular Dark
Fiber Lease, and (iii) provisions of this Agreement that relate to the
option to lease dark fiber may be amended only by a writing signed by
TriNet, Hart and MPX.
18.2 Partial Exercise of Rights. A Party's failure to enforce a provision of
--------------------------
this Agreement or to exercise a right or privilege hereunder, including
waiver of another Party's act or omission, shall not be construed as a
waiver of any subsequent act or omission or any provisions, rights or
privileges under this Agreement.
18.3 Survival. The representations, warranties, covenants and agreements
--------
hereto, or in any other document executed pursuant to this Agreement,
shall survive the execution and delivery of this Agreement. The Parties'
obligations specified in Section 6.1 (Books and Records), 6.2 (Inspection
and Audit), Section 11 (Dispute Resolution), Section 12 (Indemnification
and Liability), Section 16 (Intangible Property) and Section 14.4 (Effect
of Expiration or Termination) shall survive the expiration or termination
of this Agreement.
18.4 Merger. This Agreement, including all Exhibits, constitutes the entire
------
agreement between the Parties with respect to the subject matters hereof,
and supersedes all prior oral or written agreements, commitments or
understandings on those issues.
18.5 Binding Effect; Assignment. This Agreement shall be binding upon and
--------------------------
inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign any rights or delegate any duties
under this Agreement, except with the prior written permission of all
other Parties, which no Party shall unreasonably withhold, except: (i) a
Party may subcontract for the deployment, repair, maintenance and removal
of Physical Facilities upon reasonable notice to any affected Party; and
(ii) a Party may, at any time, assign any rights or delegate any duties
under this Agreement to an Affiliate, provided that any such assignment
shall not relieve the assigning Party of its obligations hereunder. The
Parties acknowledge that Gulf States has an exclusive capacity
arrangement with its Affiliate, Interstate FiberNet, and that Gulf States
will delegate to Interstate FiberNet certain duties pursuant to this
Agreement.
Page 21
<PAGE>
18.6 Governing Law. This Agreement is governed by the laws of Georgia,
-------------
without reference to the rules regarding choice of law.
18.7 Severability. If any part of any provision of this Agreement, or any
------------
other document incorporated herein, is found to be invalid or
unenforceable under applicable law, then that part of the Agreement or
incorporated document shall be ineffective to the extent of such
invalidity only, and shall not affect the remaining parts of the
provision or the remaining provisions of this Agreement.
18.8 Limitation on Benefits and Enforcement. The Parties intend that no
--------------------------------------
person or entity other than one of them is or shall be entitled to bring
any action to enforce any provision of this Agreement against any of
them. 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, or their respective successors and permitted
assigns.
18.9 Recovery of Costs of Enforcement. If any Party sues another Party to
--------------------------------
enforce any provision of this Agreement, the prevailing Party shall be
entitled to recover, in addition to any other remedy, reimbursement for
reasonable attorney fees, court costs, costs of investigation and other
related expenses incurred in connection therewith.
18.10 Notices. All notices, request or other communications under this
-------
Agreement shall be in writing and may be transmitted either by first-
class mail, courier or confirmed telecopy, addressed as stated below.
Notice under this Agreement is deemed given on the date of transmission
by the Party giving notice. Each Party is obligated to notify the others
of changes in the address or addressee to whom notices to that Party
should be sent.
To Gulf States and Interstate FiberNet:
Douglas A. Shumate
Vice President and CFO
Gulf States FiberNet/Interstate FiberNet
206 9th Street
West Point, Georgia 31833
706-645-8189 (TELEPHONE)
706-645-8989 (TELECOPY)
To TriNet:
James M. Johnson
TriNet, Inc.
2000 Industrial Drive
P.O. Box 400
Cornelia, Georgia 30531
706-776-4401 (TELEPHONE)
706-778-5684 (TELECOPY)
Page 22
<PAGE>
To Hart:
Michael McInerney
Vice President
Hart Communications, Inc.
196 North Forest Avenue
Hartwell, Georgia 30643
706-376-4701 (TELEPHONE)
706-376-1445 (TELECOPY)
To MPX:
Steve Blackwell
Operations Manager
MPX Systems Inc.
440 Knox Abbott Drive
Cayc, South Carolina 29033
803-343-2383 (TELEPHONE)
803-791-5952 (TELECOPY)
18.11 Interpretation. In the case of any alleged ambiguity in any term of this
--------------
Agreement, such term shall not be construed in favor of or against any
Party by reason of the participation of such Party or its attorneys in
the negotiation or drafting of this Agreement.
Page 23
<PAGE>
18.12 Counterparts. To facilitate execution, this Agreement may be executed in
------------
counterpart. All counterparts together will constitute a single
agreement.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement on
March 25, 1996.
GULF STATES FIBERNET TRINET, INC.
/s/ Andrew M. Walker /s/ James M. Johnson
- -------------------------- ----------------------------
Andrew M. Walker James M. Johnson
President President and CEO
for Gulf States FiberNet for TRiNet, Inc.
HART COMMUNICATIONS, INC. MPX SYSTEMS, INC.
/s/ J. Lee Barton
- -------------------------- ----------------------------
J. Lee Barton Michael D. Blackwell
President Executive Vice President
for Hart Communications, Inc. for MPX Systems, Inc.
By its signature below, Interstate FiberNet acknowledges that it has read this
Agreement and agrees to abide by its terms.
INTERSTATE FIBERNET
/s/ Andrew M. Walker
- ------------------------------
Andrew M. Walker
President
for Interstate FiberNet
Page 24
<PAGE>
To MPX:
---------------------------
---------------------------
---------------------------
---------------------------
18.11 Interpretation. In the case of any alleged ambiguity in any term of this
--------------
Agreement, such term shall not be construed in favor of or against any
Party by reason of the participation of such Party or its attorneys in
the negotiation or drafting of this Agreement.
18.12 Counterparts. To facilitate execution, this Agreement may be executed in
------------
counterpart. All counterparts together constitute single agreement.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement on
March 25, 1996.
GULF STATES FIBERNET TRINET, INC.
- ------------------------------ ---------------------------
Andrew M. Walker James M. Johnson
President President and CEO
for Gulf States FiberNet for TriNet, Inc.
HART COMMUNICATIONS, INC. MPX SYSTEMS, INC.
/s/ Michael D. Blackwell
- ------------------------------ ---------------------------
J. Lee Barton Michael D. Blackwell
President Executive Vice President
for Hart Communications, Inc. for MPX Systems, Inc.
By its signature below, Interstate FiberNet acknowledges that it has read this
Agreement and agrees to abide by its terms.
INTERSTATE FIBERNET
- ------------------------------
Andrew M. Walker
President
for Interstate FiberNet
Page 25
<PAGE>
EXHIBIT A
POINTS OF PRESENCE
<TABLE>
<CAPTION>
POP Contributing Party Identification of Facility
- --- ------------------ --------------------------
<S> <C> <C>
Winder Gulf States and MPX 407 Cedar Creek Road
Winder, GA 30680
Gainesville Gulf States and TriNet 340 Jesse Jewell Parkway SE
Gainesville, GA 30501
Toccoa TriNet Bell's Plaza, Unit No.4
Route 5, Brookhaven Circle
Toccoa, GA 30577
Hartwell Hart and MPX 350 West Franklin Street
Hartwell, GA 30643
</TABLE>
<PAGE>
EXHIBIT C
---------
REVENUE SHARING AGREEMENT
AMONG Gulf States FiberNet, a Georgia general partnership ("Gulf States"),
TriNet, Inc. a Georgia corporation ("TriNet"), and Hart Communications, Inc., a
Georgia corporation ("Hart")(collectively "Parties").
RECITALS
WHEREAS, Gulf States, TriNet and Hart are parties to a Network Operating
Agreement along with MPX Systems, Inc., dated March 25, 1996, to form a fiber-
optic network in North Georgia ("Network Operating Agreement");
WHEREAS, the Gulf/TriNet/Hart Ring of the Network, as defined by the Network
Operating Agreement, will carry traffic designated by the Parties to this
Agreement;
WHEREAS, pursuant to the Network Operating Agreement, Gulf States, TriNet and
Hart will share revenue from services that Gulf States provides over the
Gulf/TriNet/Hart Ring; and
WHEREAS, under the Network Operating Agreement, Gulf States, TriNet and Hart
have agreed to enter into a separate agreement regarding the sharing of revenue
from the Gulf/TriNet/Hart Ring.
NOW, THEREFORE, in consideration of the mutual promises and valuable
consideration contained herein, the sufficiency of which is hereby acknowledged,
the Parties agree as follows:
1. DEFINITIONS. In addition to any definitions specifically adopted herein, the
-----------
Parties adopt and incorporate the Definitions set forth in Section 1 of the
Network Operating Agreement.
2. AGREEMENT TO SHARE REVENUES. Pursuant to Section 2.4.1.1 of the Network
---------------------------
Operating Agreement, the Parties will jointly operate the Gulf/TriNet/Hart
Ring of the Network. As specified in Section 2.6 of the Network Operating
Agreement, the Parties will share revenues from the Gulf/TriNet/Hart Ring
pursuant to this Agreement.
3. RESPONSIBILITIES OF THE PARTIES.
-------------------------------
a. Gulf States. As specified in Sections 2 and 6 of the Network Operating
-----------
Agreement, Gulf States will:
(i) sell capacity on Traversing and Non-Traversing Circuits, both as
defined below, on the Gulf/TriNet/Hart Ring to third parties;
(ii) calculate, collect and apportion the revenues from each Traversing
and Non-Traversing Circuit;
<PAGE>
(iii) pay TriNet and Hart each its pro rata share of revenues, pursuant
to Section 9 below, pursuant to the formula and example in
Sections 5 and 7 below and the terms of Section 9 below;
(iv) keep accurate records regarding the amount of traffic and
revenues attributable to each Traversing and Non-Traversing
Circuit;
(v) prepare traffic and revenue forecasts for the Gulf/TriNet/Hart
Ring pursuant to Section 6.2 of the Network Operating Agreement;
and
(vi) provide both TriNet and Hart with such records and forecasts.
b. TriNet and Hart. As specified in Sections 2 and 3 of the Network
---------------
Operating Agreement, TriNet and Hart will:
(i) transmit Gulf States' communications over the Gulf/TriNet/Hart
Ring, and to such additional points as may be determined and
agreed to by the parties; and
(ii) provide an interface at Toccoa and Hartwell with Carolina
FiberNet.
4. CLASSIFICATION OF CIRCUITS. Circuits on the Gulf/TriNet/Hart Ring will be
--------------------------
either Traversing or Non-Traversing, each as defined below.
a. Traversing Circuits Defined. A Traversing Circuit is any individual
---------------------------
circuit, sold by Gulf States, that traverses the Network on the
Gulf/TriNet/Hart Ring as presently constituted or later expanded,
entering the Network at either Toccoa or Hartwell and exiting at either
Gainesville or Winder. A Traversing Circuit may extend outward into
another network, and may not constitute a communication that begins or
ends in the Network.
b. Non-Traversing Circuits Defined. A Non-Traversing Circuit is any
-------------------------------
individual circuit sold by Gulf States, pursuant to Section 2.4.1.3 of
the NOA, that does not meet the definition of Traversing Circuit in
Section 4 above, and that carries communications that enter or exit the
Network over a Gulf States-supplied circuit.
5. CALCULATING TRINET'S AND HART'S PRO RATA SHARE OF REVENUES FROM TRAVERSING
--------------------------------------------------------------------------
CIRCUITS.
--------
a. Circuit Components. Each Traversing Circuit may be composed of up to
------------------
three components:
(i) a component for transit leading to the Network;
(ii) a component for transit in the Network; and
(iii) a component for transit beyond the Network.
b. Price Terms and Components. The price of a Traversing Circuit is the
--------------------------
amount of revenue billed to Gulf States' customer for the Circuit,
including any promotional or
-2-
<PAGE>
outage credits. For purposes of revenue sharing, the components of a
Traversing Circuit will be denominated as follows:
<TABLE>
<S> <C>
M(AZ) = Total V & H mileage from end-to-end (the mileage on
which Gulf States' has based its price to the customer).
M(AG) = V & H mileage from the A end point to the Gainesville
pop.
M(GT) = V & H mileage from Gainesville to Toccoa (the mileage on
the Network).
M(TZ) = V & H mileage from Toccoa to the Z end point, if
applicable.
R = Total revenue billed to Gulf States' customer for the
Circuit.
X = TriNet or Hart.
R(X) = Pro rata revenue share that Gulf States will pay each to
TriNet and Hart.
</TABLE>
c. Calculating TriNet's and Hart's Pro Rata Shares. The total revenue that
-----------------------------------------------
TriNet and Hart will share for communications over Traversing Circuits is
calculated according to the following formula:
R(X) = (R[M(GT)/(M(AG)+M(GT)) x
(M(AG)+M(GT))/(M(AG)+M(GT)+M(TZ))]) / 2
The formula may also be expressed as:
R(X) = R[M(GT)/(M(AG)+M(GT)+M(TZ))]
---------------------------
2
d. Example of Application of Formula. Assume a DS-3 line sold by Gulf States
---------------------------------
between Atlanta and Charlotte at $.055/DS0 V&H mile, for a total circuit
price of $8,501.00. For purposes of this example, a DS-3 line is defined as
a digital data transmission operating over fiber-optic lines at a
transmission speed of 44.6 Mbps. In addition:
M(AZ) = 230 miles
M(AG) = 50 miles
M(GT) = 35 miles
M(TZ) = 153 miles
-3-
<PAGE>
Accordingly, under this example, TriNet and Hart would each receive
payment from Gulf States in the following amount, which would
constitute the pro rata share of the revenue to which each would be
entitled:
R(X) = $8,501 [35/(50+35+153)] = $8,501 [35/238] = $625
------------------------------------------------
2
6. CALCULATING TRINET'S AND HART'S PRO RATA SHARE OF REVENUES FROM NON-
--------------------------------------------------------------------
TRAVERSING CIRCUITS.
-------------------
a. Circuit Components. Each Non-Traversing Circuit may be composed of up
------------------
to two components:
(i) a component for transit entering (or exiting) the Network; and
(ii) a component for transit ending (or beginning) in the Network.
b. Price Terms and Components. The price of a Non-Traversing Circuit is
--------------------------
the amount of revenue billed to Gulf States' customer, including any
promotional or outage credits. For purposes of revenue sharing, the
components of a Non-Traversing Circuit will be denominated as
follows:
M(AZ) = Total V & H mileage from end-to-end (the mileage on which
Gulf States' has based its price to the customer).
M(AG) = V & H mileage from the A end point on Gulf States' network
to the Gainesville pop.
M(GZ) = V & H mileage from Gainesville to the beginning (or ending)
POP on the Network.
R = Total revenue billed to Gulf States' customer for the
Circuit.
X = TriNet or Hart.
R(X) = Pro rata revenue share that Gulf States will pay each to
TriNet and Hart.
c. Calculating TriNet's and Hart's Pro Rata Shares. The total revenue
-----------------------------------------------
that TriNet and Hart will share for communications over Non-Traversing
Circuits is calculated according to the following formula:
R(X) = R[M(GZ)/(M(AG)+M(GZ))]
----------------------
2
d. Example of Application of Formula. Assume a DS-3 line sold by Gulf
---------------------------------
States between Atlanta and Hartwell at $.055/DSO V&H mile, for a total
circuit price of $3,326.00.
-4-
<PAGE>
For purposes of this example, a DS-3 line is defined as a digital
data transmission operating over fiber-optic lines at a transmission
speed of 44.6 Mbps. In addition:
M(AZ) = 90 miles
M(AG) = 50 miles
M(GZ) = 48 miles
Accordingly, under this example, TriNet and Hart would each receive
payment from Gulf States in the following amount, which would
constitute the pro rata share of the revenue to which each would be
entitled:
R(X) = $3,326 [48/98] = $814.53
--------------
2
7. TERM AND TERMINATION. This Agreement is coterminous with the Network
--------------------
Operating Agreement. Renewal or termination of the Network Operating
Agreement will constitute renewal or termination also of this Agreement.
This Agreement may not be terminated other than at the time of termination
or expiration of the Initial Term or any Supplemental Term except pursuant
to an amendment to the Network Operating Agreement that calls for
termination of this Agreement.
8. PAYMENT. The Parties agree that Gulf States will pay TriNet and Hart on a
-------
monthly basis. Payments are due the last day of each month, and each
payment shall represent the revenue shares for the previous month. For
example, the payment due March 31st represents revenues shares earned
during February. Any payment not received by the tenth (10th) day of the
month after payment is due shall incur a late fee, calculated at the rate
of one and one-half percent (1.5%) per month (or, if lower, the maximum
lawful rate) based on the amount of the monthly payment due. For example,
if the payment due on March 31st is not received by April 10, Gulf States
will incur the late fee beginning April 1st through the date payment is
received. A statement showing the calculation of the payment amount shall
accompany each payment.
9. DISPUTE RESOLUTION AND AUDIT. Disputes under this Agreement will be handled
----------------------------
pursuant to the procedures established in the Network Operating Agreement;
provided, however, that (i) if either TriNet or Hart questions the
calculation and/or payment of its pro rata share or the records regarding
individual Circuits based on a statement or payment received from Gulf
States, the questioning company must bring such questions to Gulf States'
attention within thirty (30) days of receiving the questioned records or
revenues, and (ii) if TriNet or Hart disputes calculation or payment based
on an audit or inspection, and the audit or inspection shows that Gulf
States' recording or apportionment of revenue was incorrect by more than
five percent (5%), Gulf States shall pay all reasonable costs actually
incurred by TriNet and/or Hart in connection with such audit or inspection,
and shall refund, to TriNet and/or Hart as appropriate, any amount of
revenue that TriNet and/or Hart should have received.
10. INCORPORATION OF NETWORK OPERATING AGREEMENT. The Parties acknowledge
--------------------------------------------
that this Revenue Sharing Agreement is subject to the terms and conditions
of the Network Operating Agreement and is incorporated by reference into
the Network Operating
-5-
<PAGE>
Agreement. The Parties agree to be bound by the terms and conditions of the
Network Operating Agreement, except as specifically set forth herein.
11. COUNTERPARTS. To facilitate execution, this Agreement may be signed in
------------
counterpart. All counterparts together shall constitute a single Agreement.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement on
3/25 , 1996.
- --------
GULF STATES FIBERNET TRINET, INC.
/s/ Andrew M. Walker /s/ James M. Johnson
- -------------------------- --------------------------
Andrew M. Walker James M. Johnson
President and CEO President and CEO
for Gulf States FiberNet for TriNet, Inc.
HART COMMUNICATIONS, INC.
/s/ J. Lee Barton
--------------------------
J. Lee Barton
President
for Hart Communications, Inc.
By its signature below, Interstate FiberNet acknowledges that it has read this
Agreement and agrees to abide by its terms.
INTERSTATE FIBERNET, INC.
/s/ Andrew M. Walker
- --------------------------
Andrew M. Walker
President and CEO
for Interstate FiberNet
- 6 -
<PAGE>
EXHIBIT D
---------
DARK FIBER LEASE
BETWEEN [INSERT TRINET OR HART], a Georgia corporation ("Lessor"), and MPX
Systems, Inc., a South Carolina corporation ("Lessee") (collectively "Parties").
RECITALS
WHEREAS, Lessor and Lessee are parties to a Network Operating Agreement
between Gulf States Fibernet, Trinet, Inc., Hart Communications, Inc. and MPX
Systems, Inc., dated __________, to form a fiber-optic network in North Georgia
("Network Operating Agreement");
WHEREAS, pursuant to Section 4 of such Network Operating Agreement, Lessor
granted Lessee an Option to lease from Lessor Dark Fibers, as defined in the
Network Operating Agreement; and
WHEREAS, Lessee has given effective notice under Section 4 of the Network
Operating Agreement of its intent to exercise the Option to the extent indicated
in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and valuable
consideration contained herein, the sufficiency of which is hereby acknowledged,
the Parties agree as follows:
1. DEFINITIONS. In addition to any definitions specifically adopted herein,
-----------
the Parties adopt and incorporate the Definitions set forth in Section 1 of
the Network Operating Agreement.
2. LEASED PROPERTY. Subject to the terms and conditions set forth below and to
---------------
the provisions of the Network Operating Agreement, Lessor leases to Lessee,
and Lessee rents from Lessor, the following Dark Fiber ("Leased Property"):
a. Mileage and Capacity. This Agreement pertains to [STATE THE MILEAGE
--------------------
AND CAPACITY TO BE LEASED].
b. Location. [CHOOSE ONE OF TWO OPTIONS: (1) IF TRINET, "THE DARK FIBER
--------
LEASED HEREUNDER SHALL CONNECT THE GAINESVILLE AND TOCCOA POPS ON THE
NETWORK (2) IF HART, "THE DARK FIBER LEASED HEREUNDER SHALL CONNECT
THE TOCCOA AND HARTWELL POPS ON THE NETWORK."]
3. OWNERSHIP AND USE OF DARK FIBER. The Leased Property will remain the sole
-------------------------------
property of Lessor. This Agreement is in no way intended to convey to
Lessee any property right or interest in the Leased Property, except for
the contractual right to use the Leased Property as specifically set forth
in this Agreement and the Network Operating Agreement. Lessee agrees not to
sell, transfer or encumber the Leased Property in any way.
<PAGE>
4. RENT. In consideration for the use of the Leased Property, Lessee shall pay
----
Lessor rent pursuant to this Section.
a. Initial Lease Term. The rent during the Initial Lease Term of this
------------------
Agreement shall be $32.00 per route mile per month per fiber ("Base
Price"), without deduction or offset, which shall begin to accrue on
the first day of the Lease Period. For purposes of this Agreement,
Lease Period means the period of time beginning with complete
signature of this Agreement and ending with termination or expiration
of the lease set forth hereunder. The total monthly rent for the
Initial Lease Term shall be $_________. The Base Price shall remain
in effect for the Initial Lease Term of this Agreement, as defined
below in Section 8.
b. Supplemental Lease Term(s). With respect to any Supplemental Lease
--------------------------
Term, as defined below, the Parties may negotiate a rent other than
the Base Price; provided, however, that the rent during any
Supplemental Lease Term shall not exceed $64.00 per route mile of
Dark Fiber per month. The Parties shall agree in writing regarding
the rent for any Supplemental Lease Term, and such writing shall
become a part of this Agreement. If the Parties are unable to agree
on a rent for any Supplemental Lease Term of this Agreement, this
lease will terminate. Termination of this lease for the Parties
failure to agree on a rent for any Supplemental Lease Term shall not
affect the validity of the Network Operating Agreement.
5. PAYMENT. Lessee agrees to pay rent in advance before the first (1st) day of
-------
each month that this Agreement is in effect. Rent for any partial month
shall be prorated accordingly, and the rent from the commencement of the
Lease Period to the first (1st) day of the next month shall be due on the
day the Lease Period commences. Unless Lessor otherwise directs, all
payments shall be sent to Lessor at the address stated in Section 18.10 of
the Network Operating Agreement. If Lessee fails to make any rent payment
or pay any other sum it is required to pay under this Agreement within ten
(10) days after the due date thereof, Lessee shall pay interest on such
delinquent payment from the due date at the rate of one and one-half
percent (1.5%) per month, (or the maximum lawful rate, whichever is lower)
until such amounts are paid in full.
6. ACTIVATION. Lessee shall be responsible for providing the Transmission
----------
Services Support to activate the Dark Fiber leased hereunder.
7. REPAIRS AND REPLACEMENTS. Lessor shall keep the Leased Property in good
------------------------
condition, reasonable wear and tear expected, and, at its own expense, make
all repairs and replacements necessary for its preservation. All such
repairs and replacements shall be and remain the property of Lessor.
-2-
<PAGE>
8. TERM AND TERMINATION. This Agreement commences on the date when all Parties
--------------------
have signed at least one counterpart. The Initial Lease Term of this
Agreement and any Supplemental Lease Term(s) of this Agreement ("the Lease
Period") shall terminate on the same date(s) as the Initial Term and any
Supplemental Term(s), respectively, of the Network Operating Agreement or
termination of the Network Operating Agreement will constitute renewal or
termination also of this Agreement.
9. TAXES. [INSERT TRINET OR HART] shall be responsible for all applicable
-----
taxes with respect to the Leased Property and shall retain the right to
depreciate Lease Fiber.
10. INCORPORATION OF NETWORK OPERATING AGREEMENT. The Parties acknowledge
--------------------------------------------
that this Dark Fiber Lease is subject to the terms and conditions of the
Network Operating Agreement and is incorporated by reference into the
Network Operating Agreement. The Parties agree to be bound by the terms and
conditions of the Network Operating Agreement, except as specifically set
forth herein.
11. COUNTERPARTS. To facilitate execution, this Agreement may be executed in
------------
counterpart. All counterparts together will constitute a single agreement.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement on
____________________, 1996.
[TRINET, INC. OR HART COMMUNICATIONS, INC.] MPX SYSTEMS, INC.
- -------------------------- ---------------------------
[NAME] [NAME]
[TITLE] [TITLE]
for [TRINET OR HART] for MPX Systems, Inc.
-3-
<PAGE>
Exhibit 10.26
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC FACILITIES AND SERVICES
BETWEEN
ALABAMA POWER COMPANY AND
SOUTHERN INTEREXCHANGE FACILITIES, INC.
APC CONTRACT NUMBER SI001
-------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<C> <S> <C>
1 Definition........................................................... 1
2 Engineering and Design............................................... 3
3 Construction and Installation........................................ 4
4 Operation, Maintenance and Repair.................................... 5
5 Costs and Installments............................................... 7
6 Services and Facilities.............................................. 8
7 Use of Fibers........................................................ 9
8 Approvals and Consultation........................................... 10
9 Term................................................................. 11
10 Ownership of the Cable and Equipment................................. 11
11 Casualty............................................................. 13
12 Restoration in the Event of Outages.................................. 14
13 Alteration of Route.................................................. 14
14 Access and Security.................................................. 15
15 Expenses............................................................. 15
16 Confidentiality...................................................... 16
17 Other Activities of the Parties...................................... 16
18 Compliance with Laws................................................. 17
19 Force Majeure........................................................ 17
20 Dispute Resolution................................................... 18
21 Conditions Precedent................................................. 18
22 Assignment........................................................... 19
23 Amendment............................................................ 19
24 Binding Effect; Limitation of Benefits............................... 19
25 Notices.............................................................. 19
26 Publicity and Advertising............................................ 21
27 Severability......................................................... 21
28 Independent Contractors.............................................. 21
29 Labor Relations...................................................... 21
30 Benefited Parties.................................................... 22
31 Exercise of Right.................................................... 22
32 Additional Actions and Documents..................................... 22
33 Survival............................................................. 23
34 Headings............................................................. 23
35 Incorporation of Exhibits............................................ 23
36 Governing Law........................................................ 23
37 Counterparts......................................................... 23
38 Entire Agreement..................................................... 23
Signatures.......................................................... 23
</TABLE>
i
<PAGE>
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC FACILITIES AND SERVICES
THIS AGREEMENT (hereinafter referred to as the "Agreement"), effective as
of the 29 day of MAR, 1990, between SOUTHERN INTEREXCHANGE FACILITIES, INC.
(hereinafter referred to as "SI"), an Alabama corporation with its principal
place of business located at 113 1/2 South Main, Arab, Alabama 35016, and
ALABAMA POWER COMPANY, (hereinafter referred to as "APC"), an Alabama
corporation with its principal place of business located at 600 North 18th
Street, Birmingham, Alabama 35291, sets forth the terms and conditions for the
provision of certain telecommunications facilities and services as hereinafter
described.
W I T N E S S E T H
WHEREAS, APC for its own use has placed or will place fiber optic cable in
the static wire as part of APC's electric transmission operations along certain
of their transmission lines, which APC utilizes to operate a fiber optic
transmission system; and
WHEREAS, SI desires to obtain fiber optic telecommunications transmission
capacity in certain of the areas in which APC's electric transmission lines are
located; and
WHEREAS, SI desires to obtain from APC, and APC is willing to provide to
SI, the right to use certain designated fibers; and
WHEREAS, the parties desire to define the terms and conditions under which
said user rights will be accomplished; and
WHEREAS, the transactions reflected in this Agreement are unique and unlike
any previous transactions between the parties;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises hereinafter set forth, the parties hereto agree as
follows:
ARTICLE 1. DEFINITIONS
1.1 Additional Fibers - The optical fibers which are to be part of the SI
System and which are to be dedicated exclusively to SI's use as provided herein.
The numbers of Additional Fibers for each Route Segment are set forth in Exhibit
A, attached hereto.
1.2 Affiliated Carriers - Unless the context otherwise requires, the term
"Affiliated Carriers" of SI includes only the following: Consolidated
Communications Corporation, Inc., Southern Interexchange Facilities, Inc.,
Southern Interexchange Services, Inc., Delta Communications, Inc., Brindlee
Mountain Telephone Company, Valley Telephone Services, or the successor, parent,
or subsidiary of any of them.
1.3 APC - Unless the context otherwise requires, the term "APC" includes
Alabama Power Company, its directors, officers, employees, agents, successors
and permitted assigns.
1.4 APC Actual Cost - Shall be as set forth in Subarticle 4.3.
1.5 APC Space - Floor space to be provided to APC by SI in New Buildings
and in Common Access Areas of other SI facilities, including certain POPs, for
equipment to be used by APC solely in connection with the Primary Fibers.
1.6 APC System - The fiber optic communication transmission facilities
comprised entirely of the Primary Fibers and the equipment and other articles of
property (other than any fiber
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<PAGE>
optic cable which does not include Primary Fibers) used solely in connection
with the Primary Fibers, including without limitation, any such equipment
located in APC Space at SI POPs.
1.7 APC Territory - The geographical areas within the State of Alabama
within which APC
a. provides electric service at retail; or
b. owns or operates overhead or underground electric transmission
lines.
1.8 Cable - The fiber optic cable incorporating the Primary Fibers, the
Additional Fibers and associated suspension hardware to be installed pursuant to
this Agreement.
1.9 Circuit Service Date - The date on which a Route Segment is accepted
by SI as operational in accordance with the acceptance specifications set forth
in Exhibit C hereto.
1.10 Confidential Information - Information provided by a party to this
Agreement to the other party to this Agreement for use in connection with the
performance of this Agreement which is considered by the disclosing party to be
confidential or proprietary information and which is so identified by the
disclosing party as provided below. Confidential information may take the form
of documentation, drawings, specifications, software, technical or engineering
data, business information and other forms, and may be communicated orally, in
writing, by electronic or magnetic media, by visual observation, or by other
means. When information deemed by the disclosing party to be confidential or
proprietary is furnished in a tangible form, the disclosing party shall
prominently mark the information in a manner to indicate that it is considered
proprietary or confidential or otherwise subject to limited distribution. When
such information is provided orally, the disclosing party shall, at the time of
disclosure, clearly identify the information as being proprietary or
confidential or otherwise subject to limited distribution. No information shall
be deemed confidential for purposes hereof unless it has been so designated in
accordance with this Subarticle 1.9.
1.11 Equipment - The power equipment, electronic and optronic equipment,
including without limitation repeaters, junctions, alarm monitoring equipment
and all other articles of property which may be necessary to provide a network
of fiber optic transmission capacity throughout the SI System. Notwithstanding
any other provision of this Agreement, the term "Equipment" shall not include
any power equipment, electronic and optronic equipment, repeaters, junctions,
alarm monitoring equipment or any other articles of property installed or
located at a SI POP or a SI Central Office. The word "equipment" when not
capitalized, refers to equipment of any sort generally.
1.12 Local Access and Transport Area (LATA) - A geographic area within
which a local exchange company provides communications services.
1.13 New Buildings - Buildings and shelters, including repeater housings
that, pursuant to this Agreement, are to be constructed, erected or positioned
on real property of which APC or SI is the fee simple owner in order to house
electronic and optronic equipment unless and until such time as SI designates
such building, shelter or repeater housing as a POP. It is understood by the
parties that SI reserves the right to designate any such building, shelter or
repeater housing as a POP at any time, at which time such New Building shall
cease to be a New Building for all purposes hereunder. Such designation shall be
given to APC in writing. After such designation, if SI either fails to utilize
or ceases to utilize any designated building, shelter or repeater housing as a
POP for a period of 180 consecutive days, such building, shelter or repeater
housing shall cease to be a POP and shall become a New Building.
Page 2 of 23
<PAGE>
1.14 Point of Presence (POP) - A physical location within a LATA at which
SI establishes itself for the purpose of (i) obtaining LATA access and to which
the local exchange company provides exchange access services and (ii)
interconnecting co-located interexchange carriers.
1.15 Primary Fibers - The optical fibers installed hereunder on the Route
Segment and which are to be (i) part of the APC System (but not part of the SI
System) and (ii) dedicated exclusively to APC's use as provided herein. Unless
otherwise agreed, the usable Primary Fibers shall be as set forth in Exhibit A
attached hereto; provided, however, that the requirement of usability throughout
the Term of the Agreement shall not apply to Primary Fibers located on the Route
Segment as to which the Term of this Agreement has expired.
1.16 Route Segment - A portion of the SI System and the APC System between
one of the numbered pairs of points set forth in Exhibit A.
1.17 SCS - Unless the context otherwise requires, the term "SCS" includes
Southern Company Services, Inc., its directors, officers, employees, agents,
successors and permitted assigns.
1.18 SES - Unless the context otherwise requires, the term "SES" includes
The Southern Company, Alabama Power Company and Southern Company Services, Inc.,
and their respective directors, officers, employees, agents, successors and
permitted assigns.
1.19 SI - Unless the context otherwise requires, the term "SI" includes
Southern Interexchange Facilities, Inc., its directors, officers, employees,
agents, parent, subsidiaries, affiliates, successors and permitted assigns.
1.20 SI Central Office - A SI facility at which functions related to
portions of the SI Network in addition to the SI System are performed.
1.21 SI Network - The digital communications transmission facilities of
SI, including without limitation both the Additional Fibers and associated
Equipment and other digital communications transmission facilities, whether
existing on the date hereof or constructed hereafter.
1.22 SI Space - Floor space to be provided to SI by APC in then-existing
facilities of APC along the route of the SI System.
1.23 SI System - The fiber optic communications transmission facilities
comprised entirely of the Additional Fibers, the New Buildings and the Equipment
to be constructed pursuant to this Agreement between, but not including, the SI
POPs.
1.24 Specifications - The performance specifications for the SI System set
forth in Exhibit C hereto.
1.25 Unaffiliated Carriers - Unless the context otherwise requires, the
term "Unaffiliated Carriers" includes all carriers that are not Affiliated
Carriers.
In addition to the foregoing, certain other terms are defined within the body of
the Agreement.
ARTICLE 2. ENGINEERING AND DESIGN
2.1 Obligations of APC
(a) APC shall engineer in consultation with SI and provide detailed
specifications, construction working prints and other data as necessary to
permit construction and installation of the Cable (including without limitation
identifying any New Buildings required for the SI System) in accordance with the
Specifications. All such detailed specifications (including estimates of Actual
Page 3 of 23
<PAGE>
Costs), construction working prints and other data shall be subject to SI
Approval, and SI shall be entitled to have representatives present at all
regularly scheduled project meetings.
(b) APC shall design and configure all alternating current power
sources and other necessary and related articles of property which (together
with the articles of property to be designed and configured by SI pursuant to
Subarticle 2.2 (a) hereof) may be necessary for or useful to provide useable
fiber optic transmission capacity throughout the SI System.
2.2 Obligations of SI
(a) SI shall design and configure all electronic and optronic
equipment for the SI System, including without limitation repeaters, terminals,
junctions, alarm monitoring equipment and all other necessary and related
articles of property which (together with the articles of property to be
designed and configured by APC pursuant to Subarticle 2.1 (b) hereof) may be
necessary or useful to provide a network of fiber optic transmission capacity
throughout the SI System. SI shall have no responsibility for equipment to be
used solely in connection with the APC System, including without limitation, any
such equipment installed or located in APC Space in any New Building or at any
SI facility.
(b) Except as specifically provided for herein, SI shall have no
obligations with respect to engineering and design of the Cable or the
installation thereof, but shall have certain rights in connection with
consultation about and approvals thereof.
ARTICLE 3. CONSTRUCTION AND INSTALLATION
3.1 Obligations of APC
(a) APC shall make available electric transmission and distribution
poles, towers, substations and facilities owned or controlled by APC as required
to provide for a continuous location on which the Cable and the Equipment can be
placed, and, to the extent APC has lands available therefor, for the
construction of New Building. Such transmission and distribution facilities
shall be physically capable of supporting the Cable, or APC shall make, or have
made, at SI's expense, such improvements necessary to cause the transmission and
distribution facilities to support such Cable.
(b) APC shall supervise and, in consultation with SI, shall be
responsible for construction and installation as necessary to install the Cable
(including without limitation suspension hardware) required for the SI System
and the APC System, in accordance with the engineering and design requirements
finalized pursuant to Article 2 hereof and the Specifications; provided,
however, that APC shall not commence construction and installation of either
Route Segment No. 2 or Route Segment No. 3 without having received notification
to proceed with the appropriate Route Segment from SI.
(c) APC shall, at the expense of SI, acquire any additional land or
rights in land that may be necessary for the location and placement of New
Buildings; provided, however, that if the use of the power of eminent domain is
necessary in order to acquire any such additional land or rights in land, then
any required condemnation action shall be brought by SI in its own behalf.
Except in the case of condemnation by SI, APC shall exert its best efforts to
minimize the cost of such additional land or rights in land.
(d) APC shall be responsible, upon SI's request and at SI's expense,
for the acquisition of any easement or right-of-way rights that may be required
in order to permit (1) the installation, operation and maintenance of the Cable
or (2) the use of the Additional Fibers by SI; provided, however, that if the
use of the power of eminent domain is necessary in order to acquire any such
additional rights required for the use of the Additional Fibers by SI, then any
required condemnation action shall be brought at the expense of APC in the name
and for the use of SI. If
Page 4 of 23
<PAGE>
the cost of right-of-way perfection for any single tract is expected by APC to
exceed $500.00, APC shall notify SI. APC and SI shall agree upon proper action.
SI will not be responsible to pay in excess of $50,000.00 for all right-of-way
perfection without its further consent. However, if this limit is exceeded, SI
will, in good faith, negotiate with APC a fair cost allocation for such excess,
taking into account, among other things, APC's efforts to minimize such costs.
APC shall exert its best efforts to eliminate or minimize any such out-of-pocket
costs.
This Subarticle 3.1(d) is not intended as an acknowledgment by either
party that any such acquisition of additional rights is required, but only to
allocate the responsibility for such acquisition.
(e) APC shall provide, or arrange for the provision of, alternating
current electric power service to all New Buildings and SI Space.
3.2 Obligations of SI
(a) SI shall perform site preparation and shall prepare foundations
and fencing for all New Buildings.
(b) SI shall at its expense install all New Buildings and Equipment
used in equipping the Additional Fibers.
(c) SI shall reimburse APC for APC's Actual Cost incurred in
connection with engineering, construction and installation of the Cable
(including without limitation the labor cost of removal of existing static
wire). SI shall reimburse APC's Actual Cost of any upgrading or replacement of
poles or facilities that is necessary in order to make such poles or facilities
capable of supporting the Cable. Notwithstanding the foregoing, all equipment
utilized solely in connection with the Primary Fibers shall be paid for solely
by APC, and SI shall have no obligation to reimburse APC in connection
therewith.
(d) SI shall either pay directly or reimburse APC for any fees payable
to the Alabama Department of Transportation for the use of public rights-of-way
paralleling public highways as a result of SI's use of or right to use the
Additional Fibers.
(e) SI shall at its own expense obtain all municipal street franchise
rights that may be required for the installation of the Additional Fibers in
public rights-of-way or the use thereof by SI.
ARTICLE 4. OPERATION, MAINTENANCE AND REPAIR
4.1 Obligations of APC
(a) APC shall be solely responsible, at SI's expense, for the
operation, maintenance and repair of the Cable so as to assure continuing
conformity with the applicable Specifications. In connection therewith, APC
shall satisfy the requirements described in Subarticle 4.1(b) hereof.
(b) APC shall provide, at SI's expense, end-to-end maintenance and
restoral services for the Cable. Notwithstanding any other provision of this
Agreement, the maintenance and repair standards for the Cable shall be at least
as high as those standards utilized by APC for the maintenance and repair of
other portions of its internal communications systems.
(c) APC shall be solely responsible for the operation, maintenance and
repair of all aspects of the APC System, in addition to the Cable.
Page 5 of 23
<PAGE>
(d) APC shall at its expense perform routine inspections of the Cable
and routine right-of-way maintenance, including without limitation flights over
the Route Segment on which the Cable is located, in accordance with its standard
maintenance procedures for its transmission and distribution lines and
transmission and distribution rights-of-way.
(e) In accordance with the operation and maintenance procedures set
forth in Exhibit C hereto, APC shall provide telephonic notice to the SI NCC
prior to performing any maintenance activity with respect to the Cable or any
associated transmission or distribution line, transmission or distribution pole,
transmission or distribution tower or other facility. Such notice shall include
the Route Segment on which such maintenance is to be performed, the location at
which such maintenance is to be performed and the projected commencement and
completion times of such maintenance activity.
(f) APC shall make a reasonable effort to schedule the performance of
reimbursable maintenance, repair and restoration activities pursuant to
Subarticles 4.1 (a) and (b) so as to avoid the payment of overtime wage rates.
4.2 Obligations of SI
(a) SI shall be solely responsible for the operation, maintenance and
repair of all aspects of the SI System other than the Cable so as to assure
continuing conformity with the Specifications, including without limitation
continual monitoring of the SI Network (but not including the Primary Fibers),
fault location, procurement of replacement cable used in any restoration, and
maintenance and replacement of repeater and terminal equipment as required.
(b) SI shall reimburse APC for APC's Actual Cost in connection with
the performance by APC of its obligations with respect to the Cable pursuant to
Subarticles 4.1(a) and (b) hereof. SI shall reimburse APC for all taxes (other
than income taxes) attributable to the SI System paid by APC.
(c) SI shall pay APC's standard tariffed rates for electric power
service provided to New Buildings by APC and shall pay or reimburse APC for the
payment for electric power service provided to New Buildings by any retail
electric supplier or suppliers.
4.3 APC'S Actual Cost; Billing and Verification
(a) For purposes of this Agreement, "APC's Actual Cost" of performing
any activity shall consist of the sum of (1) all amounts paid by APC to third
party contractors or suppliers, including affiliated companies, in connection
with such activity (including any financing charges directly associated with or
attributable to such amounts) plus APC's then-prevailing reasonable overhead
charges for such activities, (2) all hourly wages paid by APC to employees of
APC for the performance of such activity or any part thereof, plus APC's then-
prevailing reasonable overhead charges for the same, (3) a ratable portion of
the salary of each salaried employee of APC who is personally involved in such
activity or any part thereof, determined by multiplying the weekly, monthly or
annual salary of each such employee by a fraction, the numerator of which is the
number of hours devoted to such activity by such employee during any pay period
and the denominator of which is the sum of the total number of hours worked and
the number of vacation hours and sick leave hours taken by such employee in such
pay period, plus APC's then-prevailing reasonable charges for the same,
("overhead charges") and (4) APC's standard charges for the use of vehicles used
in the performance of such activity.
(b) The overhead charges referred to in Subarticle 4.3 (a) above, are
APC's standard overhead charges for such activities, and are intended to be
exclusive of any profit to APC. The APC overhead charges shall be updated
annually by written notice from APC to SI.
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<PAGE>
(c) Notwithstanding any other provision of this Agreement, no cost the
incurrence of which requires SI approval shall be included in APC's Actual Cost
if such SI approval was not obtained. SI shall have the right, at all reasonable
times and at SI's expense, to inspect APC's records and charges of its Actual
Costs incurred hereunder and to verify the accuracy of such Actual Costs.
(d) Notwithstanding any other provision of this Agreement no cost
incurred by APC in connection with operating, maintaining or using the Primary
--------- ----------- --------- =======
Fibers and Equipment shall be included in APC's Actual Cost, unless approved by
====================
SI's Manager in accordance with Subarticle 8.1.
4.4 Upgrades and Rebuilding
Notwithstanding any other provision of this Agreement, no substantial
expansion or upgrade of the Cable shall be required or undertaken pursuant to
this Agreement without the concurrence of APC and SI; provided, however, that
the foregoing shall not be construed to preclude either party from rebuilding or
upgrading at its own expense its own equipment or facilities without the
concurrence of the other party. Without limiting the generality of the
foregoing, no provision of this Agreement shall be construed to entitle SI to
place or to cause APC to place more than one (1) Cable on any single Route
Segment.
ARTICLE 5. COSTS AND INSTALLMENTS
5.1 In consideration of APC's willingness to enter into a long term
business relationship, its provision of facilities and services hereunder and
its grant to SI the use of the Additional Fibers during the Term of this
Agreement, SI agrees to reimburse APC its Actual Cost for the construction and
installation of each Route Segment (except as set forth below) on a monthly
basis (upon receipt of an itemized monthly invoice from APC) as costs are
incurred by APC, provided, however, that, with respect to Route Segment Numbers
2 and 3 SI may choose to pay such costs in five (5) installments as set forth
--------------------------------------------------------
below:
25% of the total estimated cost of the Route Segment shall be due upon
notification by SI to APC to proceed with commencement of work on such
Route Segment.
20% of the Actual Cost of the Route Segment shall be due on each of
the first, second and third anniversary dates of such notification and
the balance of the Actual Cost shall be due on the fourth anniversary
date thereof.
APC estimates of the Actual Cost of each Route Segment are set forth in
Exhibit B hereto, and APC shall use its best efforts, consistent with good
construction and operating practices, to construct and install the Cable at a
cost in accordance with or below such estimates; provided, however, that nothing
contained herein shall relieve SI from its obligation to reimburse APC its total
Actual Costs incurred by APC, even if such Actual Costs exceed the estimates set
forth in Exhibit B, except that (i) the Actual Costs to be reimbursed by SI
shall be reduced by an amount equal to one-half of the amount by which the
Actual Cost, excluding the acquisition cost of the cable and the cost of the
splices, exceeds an average cost of $15,000 per mile for either Route Segment
Number 2 or Route Segment Number 3, provided that such reduction shall in no
event exceed an amount equal to $1,500 per mile, and (ii) SI agrees to
contribute to the cost of the APC System an amount equal to one-half of the
total savings in Actual Cost, excluding the acquisition cost of the cable and
the cost of the splices, below an average cost of $15,000 per mile for either
Route Segment No. 2 or Route Segment No. 3, up to a maximum contribution from SI
of an amount equal to $1,500 per mile.
The Actual Cost for any Route Segment for which APC is reimbursed monthly
will include the items described in Subarticle 4.3 above.
The Actual Cost for any Route Segment for which payment is made to APC in 5
annual installments will include the items described in Subarticle 4.3 above
plus an amount calculated
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monthly by applying a per annum rate equal to the announced prime rate of
AmSouth Bank N.A. plus one percent (1%) to the unpaid balance of total capital
expenditures accrued by APC for the Route Segment.
5.2 In further consideration of APC's performance under this Agreement, SI
shall provide to APC the following capacity on its transmission system between
agreed upon locations: (i) upon execution of this Agreement and until
installation of the second Route Segment to be constructed hereunder, the
equivalent of 1,000 T-1 miles per month; (ii) upon installation of the second
Route Segment and until the installation of the third Route Segment to be
constructed hereunder, the equivalent of 1305 T-1 miles per month; and (iii)
after installation of the third Route Segment, the equivalent of 1750 T-1 miles
per month. The certain facilities provided by SI shall have communications
capability that is equal or superior in quality, speed, reliability and cost to
the communications capability then available to APC.
5.3 In the event SI does not give APC notification to proceed with
commencement of work, within one (1) year from the date hereof, on either Route
Segment Number 2 or Route Segment Number 3, SI agrees to pay APC, in addition to
all other amounts payable under this Agreement, an amount equal to 15% of the
gross revenues of SI attributable to the use of the Additional Fibers for any
purpose in excess of 7.1 (ii) below.
5.4 SI shall also permit APC to utilize any SI building or towers,
wherever located, for the purpose of installing and operating APC's
communications devices and antennae used in connection with the operations of
the Southern electric system, provided that such use by APC does not materially
interfere with SI's use of such buildings and/or towers. Any costs incurred in
connection with the use of SI's buildings or towers by APC, including the costs
of any modification to SI's facilities to accommodate APC's use, shall be borne
by APC.
ARTICLE 6. SERVICES AND FACILITIES
6.1 Provided by APC
(a) APC hereby grants to SI the right to use the fiber optic
transmission capacity of the Additional Fibers set forth in Exhibit A, during
the Term of this Agreement.
(b) Where available and requested by SI, APC shall provide (without a
separate charge to SI) SI Space adequate to permit SI to install its Equipment
in then-existing APC facilities along each Route Segment. APC shall provide
space for racks of Equipment as needed. Unless previously specified, SI Space
will comply with power, ground, physical and environmental requirements outlined
in SI technical publications.
6.2 Provided by SI
Where available and requested by APC, SI shall provide or cause to be
provided APC Space in the Common Access Areas of SI facilities along the Route
Segments in New Buildings, or buildings adjacent thereto, adequate in each case
to permit APC to install racks of its optronics, multiplex and associated
equipment used to equip the Primary Fibers and to interconnect the APC System to
the SI Network. Unless otherwise agreed, APC Space will comply with power,
ground, physical and environmental requirements outlined in SI technical
publications. Such APC Space shall be used by APC to house APC equipment
necessary to permit the use of the Primary Fibers and interconnection with the
SI Network. Unless otherwise agreed, APC Space in a SI facility other than a New
Building, or buildings adjacent thereto, shall be in the Common Access Area of
such facility, and to the extent reasonably practicable, APC Space in a New
Building shall be separated by a wall and shall have an entrance separate from
any area containing SI's electronic and optronic equipment. SI shall provide APC
Space in the Common Access Areas of SI facilities without charge to APC. APC
Space will not exceed 120 square feet.
Page 8 of 23
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ARTICLE 7. USE OF FIBERS
7.1 During the term of this Agreement, SI may use (or permit the use of)
the Additional Fibers and the communications transmission capacity thereof for
any lawful purpose; provided however, SI agrees not to use the facilities
provided under this Agreement specifically for local exchange services or for
intrametropolitan area dedicated facilities (i) to provide connections or
complete traffic between customers or between customers and Unaffiliated
Carriers and (ii) until notification by SI to APC to proceed with commencement
of work on either Route Segment Number 2 or Route Segment Number 3 to provide
connections or complete traffic to or between any interexchange carriers or
alternate access providers except the following: MCI Telecommunications
Corporation, Sprint, Telecom USA and any Affiliated Carrier of SI. SI warrants
that such fibers, capacity and the use thereof shall not be provided to others
without first obtaining all required regulatory certifications by appropriate
regulatory bodies.
7.2 During the Term of this Agreement, APC may use (or permit use of) the
Primary Fibers for any lawful purpose, including without limitation, for (a) its
internal telecommunications, (b) communications with its suppliers directly
related to its electric utility business, (c) communications with its
electricity customers directly related to (i) the providing of electric service
by APC to such customers, (ii) the providing of weather radar services by APC to
such customers or (iii) the providing of other services by APC to such customers
which services are not, at the time of the commencement of the provision of such
services by APC, in competition with services then offered by SI or services
which SI is then in the process of actively planning or implementing, (d) the
provision of telecommunications capacity, telecommunication services, or any
combination thereof to any person or entity primarily engaged in the business of
generating, transmitting or distributing electric power (or any combination
thereof) and their affiliates engaged in such business for their internal use in
connection with such business (e) the provision of certain communication
services without charge to a limited number of users with highly specialized
needs that cannot be met by SI (similar to services provided to similar users
without charge by APC prior to the Effective Date of this Agreement) who request
such services without solicitation by APC (each of the uses or services set
forth in this Subarticle 7.2 being referred to herein as an "Enumerated Use").
7.3 If during the Term of this Agreement APC intends to use the Primary
Fibers for a purpose which it believes to be other than an Enumerated Use as
described in Subarticle 7.2 above (any such use not constituting an Enumerated
Use being referred to herein as an "Additional Use"), APC shall give notice to
SI of such intent prior to the commencement of such Additional Use, and on or
before the date of the commencement of such Additional Use APC shall pay to SI
an amount equal to its Proportionate Amount (APC twenty-five percent and SI
seventy-five percent) of the net book value of the Cable on the affected Route
Segment; provided, that if APC has paid such amount with respect to an
Additional Use of the Primary Fibers, no additional payment shall be required
hereunder with respect to any other Additional Use of the Primary Fibers, and;
provided further, that no Additional Use by APC shall be permitted if such
Additional Use shall result in APC being deemed to be a telecommunications
carrier.
7.4 If during the Term of this Agreement SI believes that APC is using the
Primary Fibers for an Additional Use and APC has not previously paid the amount
required by Subarticle 7.3 above, with respect to an intended Additional Use, SI
shall notify APC of such Additional Use, and, within thirty (30) days of receipt
of such notice from SI, APC shall either (a) acknowledge (in a written notice to
SI) such use to be an Additional Use and within one hundred fifty (150) days of
such acknowledgment either (1) discontinue such Additional Use (or cause such
Additional Use to be discontinued) or (2) pay to SI an amount equal to the sum
of the Proportionate Amounts for the Route Segment plus interest thereon at a
rate equal to the interest rate then being charged by Chemical Bank, New York,
New York, to its largest and most credit-worthy commercial borrowers on the
outstanding amount so overdue, or, if less, the highest rate then permitted by
applicable law, from the date on which APC commenced such Additional Use until
the date upon which payment
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is made pursuant to this Subarticle 7.4; provided, that if APC has paid such
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amount with respect to an Additional Use of the Primary Fibers, no additional
payment shall be required hereunder with respect to any other Additional Use of
the Primary Fibers; or (b) refer the determination of whether such use
constitutes an Additional Use to the dispute resolution procedure set forth in
Article 20 hereof. If the final determination of such dispute resolution
procedure is that such use is an Enumerated Use, no payment to SI shall be
required hereunder with respect to such use. If such final determination is that
such use is an Additional Use, then APC shall, within one hundred eighty (180)
days of such determination, either discontinue such Additional Use (or cause
such Additional Use to be discontinued) or pay to SI an amount equal to the sum
of the Proportionate Amounts for the Route Segment plus interest thereon at a
rate equal to the interest rate then being charged by Chemical Bank, New York,
New York, to its largest and most credit-worthy commercial borrowers on the
outstanding amount so overdue, or, if less, the highest rate then permitted by
applicable law, from the date on which APC commenced such Additional Use until
the date upon which payment is made pursuant to this Subarticle 7.4; provided,
that if APC has previously paid such amount with respect to an Additional Use of
the Primary Fibers, no additional payment shall be required hereunder with
respect to any other Additional Use of the Primary Fibers.
7.5 Notwithstanding any other provision of this Agreement, in the event
APC becomes obligated pursuant to either Subarticle 7.3 or Subarticle 7.4 above,
to pay to SI an amount equal to the sum of the Proportionate Amounts for the
Route Segment, then from and after the date on which such obligation accrues:
(a) APC will be obligated to reimburse SI for its Proportionate Amount of
the net book value of the Cable on the affected Route Segment; and
(b) APC shall reimburse SI for that proportion of any amounts paid by SI
pursuant to the first sentence of Subarticle 7.3 above in connection with
the repair, restoration or replacement of any portion of the Cable that
bears the same ratio to the total amount so paid by SI as the number of
Primary Fibers bears to the total number of Primary and Additional Fibers
included in the Cable installed on the Route Segment with respect to which
such payment relates.
At its option, SI may apply all or any portion of any amount due from APC
under this Subarticle 7.5 with respect to the cost of acquiring Cable or of
repairing, restoring or replacing the Cable as an offset against any amounts due
to APC under any other provision of this Agreement or may invoice APC for all or
any portion of such amounts not theretofore applied as such an offset. APC shall
pay any such amount within thirty (30) days after the receipt of such statement.
In addition to any other right or remedy available to SI, if APC fails to make
any required payment pursuant to this Subarticle 7.5 within thirty (30) days
after receipt of such statement, then such overdue payment shall be subject to a
late payment charge equal to the interest rate then being charged by Chemical
Bank, New York, New York, to its largest and most credit-worthy commercial
borrowers on the outstanding amount so overdue, or, if less, the highest rate
then permitted by applicable law.
ARTICLE 8. APPROVALS AND CONSULTATION
8.1 SI's Vice President is hereby designated as the "SI Project Manager,"
and APC's Manager, Information Network is hereby designated as the "APC Project
Manager" for purposes of this Agreement. Whenever pursuant to this Agreement
either party is entitled to approve a matter, the Project Manager for the party
responsible for the matter shall notify the Project Manager of the other party
of the nature of such matter. The Project Managers shall discuss such matter,
and each Project Manager is hereby authorized to approve such matter on behalf
of his company if such Project Manager believes such matter to be in the best
interests of his company. In no event shall any such approval be unreasonably
withheld or delayed.
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8.2 Whenever in this Agreement it is provided that APC will take action
"in consultation with SI," it is intended that such consultation shall be
thorough and meaningful, and that the views of SI with regard to the matter
under consultation shall be given the weight appropriate to the experience and
expertise of SI in telecommunications.
8.3 Whenever in this Agreement it is provided that SI will take action "in
consultation with APC," it is intended that such consultation shall be thorough
and meaningful, and that the views of APC with regard to the matter under
consultation shall be given the weight appropriate to the experience and
expertise of APC in telecommunications and in the transmission and use of
electric power.
ARTICLE 9. TERM
9.1 The original term of this Agreement (hereinafter referred to as the
"Original Term") shall commence on the Effective Date first above written and,
with respect to any Route Segment, end on the twentieth (20th) anniversary of
the Circuit Service Date for such Route Segment (hereinafter referred to as the
"Original Termination Date"). Unless SI elects not to extend and renew the term
of this Agreement with respect to a Route Segment in the SI System by giving
written notice as described below, the Term of this Agreement with respect to
such Route Segment shall be automatically extended and renewed for two (2)
additional periods of ten (10) years each (each such additional Term hereinafter
referred to as a "Renewal Term"), such Renewal Terms to begin immediately
following expiration of the Original Term, or the immediately preceding Renewal
Term, as the case may be, for such Route Segment and to end respectively on the
tenth (10th) and twentieth (20th) anniversaries of the Original Termination Date
for any such Route Segment. If SI desires not to renew the Term of this
Agreement for a Route Segment, SI shall give APC written notice thereof at least
two (2) years prior to the commencement of the applicable Renewal Term for such
Route Segment. The Original Term and any Renewal Terms are collectively referred
to herein as the "Term."
ARTICLE 10. OWNERSHIP OF THE CABLE AND EQUIPMENT
10.1 Legal Title. Legal title to the Cable, and to any item of Equipment
installed upon electric transmission or distribution poles of APC, shall be held
by APC. Legal Title to any item of Cable or Equipment which is purchased or
obtained initially by SI shall vest in APC upon delivery of such item to APC.
With respect to the Cable and those fibers not dedicated to SI's use hereunder,
APC shall have absolute legal and beneficial ownership. With respect to the
Additional Fibers, APC shall hold legal title to the same as SI's nominee and,
with respect to such property, SI, having paid the amount stated above, will be
the beneficial owner. Accordingly, SI shall, for tax purposes, account for such
property as the owner thereof, and as between the parties, shall be entitled to
any investment tax credit, depreciation and any other tax attributes with
respect to the Additional Fibers. APC agrees that it will not, for tax purposes,
account for the property associated with the Additional Fibers as though it were
the tax owner thereof and shall not attempt to claim any of the tax attributes
with respect thereto. The parties agree they shall file all tax returns and
otherwise take all actions with respect to taxes in a manner which is consistent
with the foregoing. Beneficial ownership of the Additional Fibers shall revert
to APC upon termination of this Agreement.
10.2 Purchase Option. Not earlier than (a) its receipt of notice from SI
electing not to renew the Term for the Route Segment or (b) the beginning of the
thirty-eighth (38th) year of the Term for a Route Segment, APC may give written
notice to SI tentatively electing to purchase the New Buildings, Equipment or
both located or installed on such Route Segment as of the date of APC's written
notice as provided in this Subarticle 10.2. Notwithstanding the foregoing, APC's
right to purchase the New Buildings and Equipment pursuant to this Subarticle
10.2 shall not apply to any former New Building which has been designated by SI
as a POP or to any equipment installed in or located at such POP, other than
repeater equipment used to equip the Additional Fibers (hereinafter referred to
as the "Optional Repeater Equipment"). The purchase price for any such purchase
shall
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be equal to the aggregate Fair Market Value (as hereinafter determined) of the
applicable New Buildings, Equipment and Optional Repeater Equipment to be
purchased. The Fair Market Value of the applicable New Buildings, Equipment and
Optional Repeater Equipment shall be determined in accordance with the
procedures set forth in the third paragraph of this Subarticle 10.2. At the
close of such procedures, APC shall notify SI in writing of its final
determination, which shall be irrevocable, of the applicable New Buildings,
Equipment and Optional Repeater Equipment, if any, which APC elects to purchase,
which notice shall be furnished not less than two (2) years prior to the end of
the Term for such Route Segment. The provisions of this Subarticle 10.2 also
permit and apply equally to an election by APC to retain title, and to obtain
all beneficial rights of use, to any Equipment the title to which was held by
APC during the Term of this Agreement pursuant to Subarticle 10.1 above, solely
because it was installed upon a transmission or distribution tower or pole of
APC.
If APC elects to purchase any of the applicable New Buildings, Equipment or
Optional Repeater Equipment as above provided, then at the end of the Term with
respect to the Route Segment and upon payment to SI of the Fair Market Value of
the applicable New Buildings, Equipment and Optional Repeater Equipment, SI
shall transfer to APC all right, title and interest of SI in and to the
applicable New Buildings, Equipment or Optional Repeater equipment purchased by
APC.
"Fair Market Value" shall mean the fair market sales value (without regard
to any of the terms and conditions herein provided) which would be obtained in
an arm's length transaction between an informed and willing purchaser under no
compulsion to buy and an informed and willing seller under no compulsion to
sell. Whenever "Fair Market Value" is required to be determined under this
Agreement, it shall be determined by the mutual agreement of APC and SI in
accordance with the preceding sentence. If APC and SI do not agree within ninety
(90) days after APC's notice of tentative election, such amounts shall be
determined by a qualified independent appraiser mutually satisfactory to APC and
SI. If APC and SI fail to agree upon a satisfactory independent appraiser within
ten (10) working days following the end of the ninety (90) day period referred
to above, APC and SI shall each within ten (10) business days appoint a
qualified independent appraiser, and such appraisers shall jointly determine
such amounts. If, within thirty (30) days after the appointment of the latter of
such two (2) appraisers, such two (2) appraisers cannot agree upon such amounts,
such two (2) appraisers shall, within ten (10) days, appoint a third appraiser
and such amounts shall be determined by such three (3) appraisers, who shall
make their appraisals within fifteen (15) days following the appointment of the
third appraiser, and any determination so made shall be conclusive and binding
upon APC and SI. If no such third appraiser is appointed within the ten (10)
days specified therefor, either party may apply to the American Arbitration
Association to make such appointment, and both parties shall be bound by any
appointment so made. If either party shall have failed to appoint an appraiser,
the determination of Fair Market Value of the single appraiser appointed shall
be final. If three (3) appraisers shall be appointed and the determination of
one (1) appraiser is more disparate from the average of all three (3)
determinations than each of the other two (2) determinations, then the
determination of such appraiser shall be excluded, the remaining two (2)
determinations shall be averaged and such average shall be final and binding
upon the parties hereto. If no determination is more disparate from the average
of all three (3) determinations than all the other determinations then such
average shall be final and binding upon the parties hereto. The appraisal
procedure shall be conducted in accordance with the American Arbitration
Association rules as in effect on the date hereof, except as modified hereby.
The expenses of the foregoing appraisal procedure with respect to the applicable
New Buildings and Equipment, whenever undertaken pursuant to this Agreement,
shall be borne equally by APC and SI, provided, that such expenses of the
appraisal procedure shall be borne by APC with respect to each tentative
election of its purchase option rights which does not result in the purchase of
the applicable New Buildings, Equipment and Optional Repeater Equipment;
provided further, that APC may at any time notify SI and the appraisers that it
has determined not to purchase the applicable New Buildings, Equipment and
Optional Repeater Equipment, whereupon SI shall bear any expenses of the
appraisal procedure incurred after such notice.
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In the event that a casualty occurs with respect to any New Building,
Equipment or Optional Repeater Equipment after a determination of the Fair
Market Value for such New Building, Equipment or Optional Repeater Equipment, a
new determination of the Fair Market Value shall be made for the New Building or
Optional Repeater Equipment replacing the property which was the subject of such
casualty, and such predetermined Fair Market Value shall be the purchase price
for such replacement New Building, Equipment or Optional Repeater Equipment;
provided, that no such new Fair Market Value determination shall be required
hereunder if, prior to such casualty, APC had failed to furnish to SI not less
than two (2) years prior to the Term for the applicable Route Segment, its final
determination of the New Buildings, Equipment or Optional Repeater Equipment it
elected to purchase; and provided further, that in the event of such a new Fair
Market Value determination prior to the date for APC's irrevocable notice of the
property which it elects to purchase hereunder, such date shall be extended as
required so that APC shall have not less than three (3) months from its receipt
of such Fair Market Value determination to the date by which it must provide
such irrevocable notice to SI.
ARTICLE 11. CASUALTY
11.1 Unless otherwise agreed, if the whole or any part of (a) the Cable,
(b) the Equipment, (c) any New Building, (d) any APC Space in the Common Access
Area of a SI POP or (e) any SI Space in a APC facility is damaged or destroyed
by casualty, APC shall promptly repair, restore or replace (i) the Cable or (ii)
the SI Space (or both) and SI shall promptly repair, restore or replace (x) the
Equipment, (y) the New Building or (z) the APC Space (or any of them), in each
case as necessary to restore the SI System (including without limitation, if
applicable, the APC Space or the SI Space) to full compliance with the
provisions of this Agreement.
11.2 Except as hereinafter provided, the repair, restoration and
replacement of Equipment, New Buildings and APC Space in Common Access Area of a
SI POP as provided in this Article 11 shall be at the sole expense of SI.
Notwithstanding the foregoing, if any Equipment, New Building or APC Space in
the Common Access Area of a SI POP is damaged or destroyed due to in whole or in
part to the negligence or willful misconduct of APC, then APC shall bear the
proportion of the cost of repairing, restoring or replacing such Equipment, New
Building or APC Space, as applicable, for the damage to or destruction of which
it is causally responsible.
11.3 Except as hereinafter provided, the repair, restoration and
replacement of any SI Space in an APC facility shall be at the sole expense of
APC. Notwithstanding the foregoing, if any SI Space located in an APC facility
is damaged or destroyed due in whole or in part to the negligence or willful
misconduct of SI, then SI shall bear the proportion of the cost of APC
repairing, restoring or replacing such SI Space, as applicable, for the damage
to or destruction of which it is causally responsible.
11.4 Except as hereinafter provided, if any portion of the Cable is
damaged or destroyed by casualty at any time prior to the commencement of the
sixteenth (16th) year of the Original Term with respect to the Route Segment on
which such portion of the Cable is installed, then APC's repair, restoration and
replacement of such portion of the Cable shall be at the sole expense of SI; and
if any portion of the Cable is damaged or destroyed by casualty at any time
following the commencement of the sixteenth (16th) year of the Original Term but
prior to the Original Termination Date with respect to the Route Segment on
which such portion of the Cable is installed, then SI shall have the option of
APC repairing, restoring and replacing such portion of the Cable at SI's expense
or terminating this Agreement for its convenience. Unless SI notifies APC in
writing of its election to terminate the Agreement within five (5) business days
of notification to SI of a casualty, SI shall be deemed to have elected repair,
restoration and replacement of the Cable. If SI elects to terminate this
Agreement as set forth in the preceding sentence, the Additional Fibers shall be
dedicated for use by APC in any manner whatsoever and SI shall assign, at no
cost to APC, all its rights and title to all New Buildings and Equipment to APC
immediately thereafter.
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ARTICLE 12. RESTORATION IN THE EVENT OF OUTAGES
12.1 Upon any interruption of the transmission capacity of the SI System
or any of the Primary Fibers, including without limitation any failure of such
transmission capacity to satisfy the applicable Specifications, APC and SI agree
to take steps promptly to provide restoration of such transmission capacity in
accordance with the procedures and priorities set forth in Exhibit C hereto;
provided, however, that nothing herein or in Exhibit C shall be construed to
preclude APC 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 APC's judgment is immediately
necessary to the provision of electric power service) than to the restoration of
service hereunder.
ARTICLE 13. ALTERATION OF ROUTE
13.1 Whenever during the Term of this Agreement it may be necessary or
desirable from the standpoint of APC's electric utility operations to do so, APC
may upon reasonable notice to SI relocate all or any part of the SI System to
one or more alternate routes or rights-of-way. In such event, APC shall give SI
as much notice as reasonably practicable and, except in case of emergency, at
least forty-five (45) days' written notice of the proposed relocation of the SI
System, specifying a seven (7) day period during which APC is prepared to
transfer the service over the SI System to the new right-of-way. Within ten (10)
days of such notice, SI shall advise APC of the time or times within such seven
(7) day period when SI desires to accomplish such transfer of service, or, if it
fails to do so, within ten (10) days following the expiration of such ten (10)
day period, APC shall advise SI of the time or times within such seven (7) day
period when such transfer of service shall be accomplished. At the time or times
so designated, the parties shall cooperate to accomplish such transfer of
service in accordance with the provisions of Exhibit C. Any such relocation
shall be at the sole expense of APC, including without limitation, the cost of
any land, interests in land, facilities and equipment necessary to accomplish
such relocation.
13.2 In the event that during the Term of this Agreement APC is required
by public authorities or by lawful order or decree of a regulatory agency or
court to relocate all or any part of the electric transmission or distribution
facilities upon which the SI System or any part thereof is located, APC and SI
shall cooperate in performing such relocation so as to minimize any interference
with the use of the SI System or the APC System by either party and to avoid
unreasonably impairing the ability of each to provide communications services of
the type, quality and reliability contemplated by this Agreement. Any such
relocation shall be accomplished in accordance with the provisions of Exhibit C.
Unless otherwise agreed by the parties, SI shall bear seventy-five percent (75%)
and APC shall bear twenty-five percent (25%) of the cost directly associated
with the relocation of the Cable, and SI shall bear all costs directly
associated with the relocation of Equipment and New Buildings; provided,
however, that APC shall bear all costs directly associated with the relocation
of the Cable, the Equipment and New Buildings to the extent that any such
relocation results from the failure or inability of APC to obtain (including
without limitation, through the exercise of the power of eminent domain either
in its own name or in the name and for the use of SI, or both) any easements,
right-of-way rights or other rights in land necessary to permit the
installation, operation and maintenance of APC's electric transmission towers,
poles or other facilities or the Cable (including without limitation, the use of
the Additional Fibers by SI) upon the land from which the Cable, Equipment or
New Buildings must be relocated; provided further, that the immediately
preceding proviso of this sentence shall not apply in the event of a relocation
resulting from the inability of APC to obtain necessary easements, right-of-way
rights or other rights in land through the exercise of the power of eminent
domain in a proceeding that is timely instituted and diligently prosecuted
unless APC certified to SI prior to the installation of the Cable that APC had
obtained all necessary easements, rights-of-way or other rights in land.
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Notwithstanding the provisions of the foregoing paragraph, if any such
relocation is required after the sixteenth (16th) year of the Original Term with
respect to the Route Segment affected by such relocation, then SI shall have the
option of bearing the cost of such relocation in accordance with the provisions
of the foregoing paragraph or terminating this Agreement for its convenience.
Unless SI notifies APC in writing of its election to terminate the Agreement
within thirty (30) days of notice to SI of a required relocation, SI shall be
deemed to have elected to bear its proportionate share of the cost of such
relocation as provided in the foregoing paragraph. If SI elects to terminate
this Agreement as set forth above, the Additional Fibers shall be dedicated for
use by APC in any manner whatsoever and SI shall assign, at no cost to APC, all
its rights and title to all New Buildings and Equipment on such Route Segment to
APC immediately thereafter.
ARTICLE 14. ACCESS AND SECURITY
14.1 SI agrees, upon reasonable request, to allow APC direct ingress and
egress to all APC Space to be provided to APC as described above, and to permit
APC to be on SI's premises at such times as may be required for APC to perform
any appropriate maintenance and repair of equipment at such APC Space. SI may
require that a representative of SI accompany any representatives of APC having
access to the APC Space except in New Buildings having separate entrances
providing access only to the APC Space therein. Employees and agents of APC
shall, while on the premises of SI, comply with all rules and regulations,
including without limitation security requirements and, where required by
government regulations, receipt of satisfactory governmental clearances. APC
shall provide to SI a list of APC's employees or authorized APC designee's
employees who are performing work on, or who have access to, the APC Space. SI
shall have the right to notify APC that certain APC or authorized APC designee
employees are excluded if, in the reasonable judgment of SI, the exclusion of
such employees is necessary for the proper security and maintenance of SI's
facilities.
14.2 APC agrees, upon reasonable request, to allow SI direct ingress and
egress to all SI Space to be provided to SI as described above, and to permit SI
to be on APC's premises at such times as may be required for SI to perform any
appropriate maintenance and repair of Equipment located at such SI Space. APC
may require that a representative of APC accompany any representatives of SI
having access to the SI Space. Employees and agents of SI shall, while on the
premises of APC, comply with all rules and regulations, including without
limitation security requirements and, where required by government regulations,
receipt of satisfactory governmental clearances. SI shall provide to APC a list
of SI's employees or authorized SI designee's employees who are performing work
on, or who have access to, the SI Space. APC shall have the right to notify SI
that certain SI or authorized SI designee employees are excluded if, in the
reasonable judgment of APC, the exclusion of such employees is necessary for the
proper security and maintenance of APC's facilities.
14.3 Except as provided in Subarticle 14.2 above, with respect to the SI
Space, SI and authorized SI designees shall have the right to visit any
facilities of APC utilized in providing the SI System upon reasonable prior
written notice to APC; provided, that APC may require that a representative of
APC accompany any representatives of SI or of an authorized SI designee making
such visit. Such visitation right shall include the right to inspect the SI
System and to review worksheets, to review performance or service data, and to
review other documents used in conjunction with this Agreement. Employees and
agents of SI or of an authorized SI designee shall, while on the premises of
APC, comply with all rules and regulations, including without limitation
security requirements and, where required by government regulations, receipt of
satisfactory governmental clearances. APC shall have the right to notify SI that
certain SI or authorized SI designee employees are excluded if, in the
reasonable judgment of APC, the exclusion of such employees is necessary for the
proper security and maintenance of APC's facilities.
ARTICLE 15. EXPENSES
15.1 Except for costs 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
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amendments hereto) and the transactions contemplated hereunder, including all
legal and accounting fees and disbursements.
ARTICLE 16. CONFIDENTIALITY
16.1 Each party agrees to provide to the other party such information as
shall be necessary to permit the performance of their respective obligations
hereunder. Each party hereto shall, in accordance with Subarticle 1.9 hereof, at
or prior to the time of providing information, identify in writing as
confidential all information provided by such party to the other party to this
Agreement which is considered by such providing party to be confidential or
proprietary information. No information which is provided by either party to the
other shall be considered Confidential Information unless it is specifically so
identified in writing 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, (i) use any portion of such
Confidential Information for any purpose other than performance pursuant to this
Agreement, or (ii) disclose any portion of such Confidential Information to any
persons or entities other than the officers and employees of such party who
reasonably need to have access to the Confidential Information for purposes of
performance under this Agreement and who are bound by appropriate
confidentiality agreements and commitments consistent with those utilized by
such party in protecting its own confidential information.
Nothing herein shall be construed to prohibit APC from utilizing
Confidential Information provided by SI in connection with APC's or APC's
operation, maintenance and use of the APC System or to prohibit SI from
utilizing Confidential Information provided by APC in connection with SI's use
of the Additional Fibers, notwithstanding the fact that such operation,
maintenance or use of the APC System by APC or such use of the Additional Fibers
by SI might not, for some purposes, be deemed to be performance pursuant to this
Agreement. The obligations of a recipient party with respect to Confidential
Information shall remain in effect during and after the Term of this Agreement
except to the extent that (a) such Confidential Information becomes generally
available to the public other than as a result of unauthorized disclosure by the
recipient or persons to whom the recipient has made the information available,
(b) such Confidential Information has been released without restriction by the
party providing the Confidential Information to another person or entity, (c)
such Confidential Information was received by the recipient on a non-
confidential basis from a third party lawfully possessing and lawfully entitled
to disclose such information, or (d) the recipient party is able to establish
that the Confidential Information was independently developed or discovered by
employees or agents of such party who had no knowledge of the Confidential
Information by reason of the disclosure hereunder.
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 proceedings, 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.
ARTICLE 17. OTHER ACTIVITIES OF THE PARTIES
17.1 Either party may engage in and possess interests in other business
ventures of any nature whatsoever, and may conduct all activities, including
activities in connection with fiber optic and other communications facilities,
except as specifically and explicitly limited pursuant to this Agreement.
Nothing in this Agreement is intended, or shall be interpreted, to restrict
either party in connection with any such activity contemplated pursuant to this
Agreement, so long as a party does
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not violate any specific, explicit restriction or obligation set forth in this
Agreement. Without limiting the generality of the foregoing, nothing in this
Agreement shall be construed or interpreted to prohibit APC from installing or
permitting others to install additional communications capacity, including
without limitation fiber optic transmission capacity, within the rights-of-way
constituting any Route Segment, but only where the use of such
telecommunications capacity by others is to connect areas other than the
termination points of each Route Segment.
ARTICLE 18. COMPLIANCE WITH LAWS
18.1 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 agency, authority, bureau, commission,
department or instrumentality thereof, or any court, tribunal, or arbitrator, in
all applicable, material respects in connection with this Agreement.
18.2 Each party hereto agrees to comply, and to cause its employees to
comply, with all applicable requirements of law pertaining to its activities in
connection with this Agreement, including without limitation:
(a) all requirements of law affecting safety and health, including
without limitation the Occupational Safety and Health Act of 1970,
as amended, and any applicable Right to Know statutes;
(b) all requirements of law prohibiting discrimination against any
employee or applicant for employment because of race, color,
religion, sex, national origin, age or handicap;
(c) workers' compensation laws, unemployment compensation laws, sickness
and disability laws, social security laws, the Fair Labor Standards
Act of 1938, as amended, and all other requirements of law relating
to employment and to the licensing and operations of its employees;
and
(d) requirements imposed by any other federal, state or local regulatory
bodies having jurisdiction over its activities in connection with
this Agreement.
ARTICLE 19. FORCE MAJEURE
19.1 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 or nonoccurrence of any act or event that
has, had or reasonably may be expected to have an adverse effect on the rights
or the obligations arising pursuant to this Agreement or an adverse effect on
the engineering, construction, installation, operation, maintenance or
management of all or any portion of the SI System, 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. 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, riots, or civil disturbances;
(b) labor disputes, strikes, work slowdowns, or work stoppages;
Page 17 of 23
<PAGE>
(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) suspension, termination, interruption, denial, or failure of renewal of
any permit, license, consent, authorization, or approval necessary to the
operation, maintenance or management of the SI System if such act or event
is not the result of wanton or willful action of the party relying thereon;
(e) 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;
(f) failure of any subcontractor or any supplier to furnish labor,
services, materials, or equipment in accordance with its contractual
obligations, provided such failure is itself due to an event of Force
Majeure or its adverse effect and the party relying thereon cannot obtain
substitute performance within a reasonable time; or
(g) a defect in manufactured equipment or manufactured components,
provided, that in any case 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.
ARTICLE 20. DISPUTE RESOLUTION
20.1 Each party to this Agreement agrees to use good faith efforts to
negotiate and resolve any controversy or claim between the parties hereto
arising out of or relating to this Agreement or any breach thereof (hereinafter
referred to as a "Dispute"). If a Dispute cannot be resolved through such
efforts, then either party may seek resolution of a Dispute by submitting such
Dispute to a "Dispute Committee," consisting of one designee of each party, by a
written submission delivered to the other party. The Dispute Committee shall
consider the Dispute within the thirty (30) day period following the date of
such submission.
If any Dispute cannot be resolved by the Dispute Committee within said
period in accordance with the procedures set forth in the preceding paragraph,
then both parties shall be entitled to pursue their remedies at law and in
equity with respect to the dispute. The parties hereby agree and confirm that
the Cable to be constructed, operated and maintained pursuant to this Agreement
is unique. Accordingly, in addition to any other remedies which either party may
have at law or in equity, the parties hereby agree that each party shall have
the right to have all obligations, undertakings, agreements, covenants and other
provisions of this Agreement specifically performed by the other, and that
either party shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States or of any state or other
political subdivision thereof. During the pendency of a Dispute, the parties
shall continue to satisfy all of their obligations pursuant to this Agreement.
ARTICLE 21. CONDITIONS PRECEDENT
21.1 All obligations of the parties hereto are subject to the condition
that all requisite governmental and regulatory approvals of the execution,
delivery and performance of this Agreement have been, or will be, obtained. Each
party agrees to exert its best efforts to obtain all such approvals
Page 18 of 23
<PAGE>
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 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 APC and SI shall
negotiate in good faith in an effort to restore insofar as possible the economic
benefits of the SI System to SI and the economic benefits of the APC System to
APC.
ARTICLE 22. ASSIGNMENT
22.1 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 any entity which controls, is controlled by or is under common
control with such party and to any entity which acquires all or substantially
all of such party's assets. 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.
22.2 Notwithstanding the foregoing, with respect to any Route Segment for
which APC is reimbursed its Actual Cost of construction and installation on a
monthly basis as such costs are incurred, SI shall have the right to assign this
Agreement to a lending institution where such is required of said lending
institution as part of its financing agreement with SI for such Route Segment.
ARTICLE 23. AMENDMENT
23.1 This Agreement shall not be amended, altered or modified except by an
instrument in writing duly executed by all parties.
ARTICLE 24. BINDING EFFECT; LIMITATION OF BENEFITS
24.1 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 any 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 or permitted assigns.
ARTICLE 25. NOTICES
25.1 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 or transmitted by telecopy or telegraph, addressed as follows:
If to APC:
Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
Attention: Manager, Information Resources
with copies to:
Page 19 of 23
<PAGE>
Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
Attention: Manager Information Network
and
Southern Company Services, Inc.
64 Perimeter Center East
Atlanta, Georgia 30346
Attention: Sr. Vice President
Information Resources
and
Southern Company Services, Inc.
Post Office Box 2625
Birmingham, Alabama 35202
Attention: Timothy D. Ford
and
W. M. Beale, Jr., Esq.
Balch & Bingham
Post Office Box 306
Birmingham, Alabama 35201
If to SI:
Southern Interexchange Facilities, Inc.
Post Office Drawer E
113 South Main Street
Arab, Alabama 35016
Attention: President
with copies to:
Southern Interexchange Facilities, Inc.
Post Office Drawer E
113 South Main Street
Arab, Alabama 35016
Attention: Vice President
and
Southern Interexchange Facilities, Inc.
Post Office Drawer E
113 South Main Street
Arab, Alabama 35016
Attention: Counsel
Page 20 of 23
<PAGE>
Each party may designate by notice in writing a new address 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 mailed in the manner described above, or which
shall be delivered to a telegraph company, 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
conclusive evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
ARTICLE 26. PUBLICITY AND ADVERTISING
26.1 Neither party hereto shall publish or use any advertising, sales
promotions, or other publicity materials that use the other party's logo,
trademarks, or service marks without the prior written approval of the other
party. Except as provided in Subarticle 26.2 below, each party shall have the
right to review and approve any publicity materials, press releases or other
public statements by the other party that refer to or describe any aspect of
this Agreement. Each party agrees not to issue any such publicity materials,
press releases or public statement without the prior written approval of the
Public Relations Department for the other party. Unless otherwise agreed,
neither party shall release the text of this Agreement or any material portion
thereof (other than in a form modified to remove all references to the identity
of the other party) to any person or entity other than the parties hereto for
any purpose other than those specified in Subarticle 26.2 below.
26.2 The provisions of Subarticle 26.1 above, shall not apply to
reasonably necessary disclosures in or in connection with regulatory filings or
proceedings, financial disclosures which in the good faith judgment of the
disclosing party are required by law, or disclosures that may be reasonably
necessary in connection with the performance of this Agreement or any of the
obligations hereof.
ARTICLE 27. SEVERABILITY
27.1 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, however, 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 APC and SI shall negotiate in good faith in an effort to restore
insofar as possible the economic benefits of the SI System to SI and the
economic benefits of the APC System to APC.
ARTICLE 28. INDEPENDENT CONTRACTORS
28.1 In all matters pertaining to this Agreement, the relationship of APC
and SI shall be that of independent contractors, and neither APC nor SI 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 SI and APC; and 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 social security, withholding and worker's compensation
responsibilities.
ARTICLE 29. LABOR RELATIONS
29.1 Each party hereto shall be responsible for labor relations with its
own employees.
Page 21 of 23
<PAGE>
29.2 APC agrees to notify SI immediately whenever APC has knowledge that a
labor dispute concerning its employees is delaying or threatens to delay APC's
timely performance of its obligations under this Agreement. APC shall endeavor
to minimize impairment of its obligations to SI (by using APC's management
personnel to perform work, or by other means) in event of a labor dispute.
29.3 SI agrees to notify APC immediately whenever SI has knowledge that a
labor dispute concerning its employees is delaying or threatens to delay SI's
timely performance of its obligations under this Agreement. SI shall endeavor to
minimize impairment of its obligations to APC (by using SI's management
personnel to perform work, or by other means) in event of a labor dispute.
29.4 If SI determines that APC's activities pursuant to this Agreement in
any SI facility are causing or will cause labor difficulties for SI, APC agrees
to discontinue those activities until the labor difficulties have been resolved;
provided, that in any such event and notwithstanding any other provision of this
Agreement, SI shall during the pendency of such labor difficulties perform at
its own expense any such activities that may be reasonably necessary to the
operation and maintenance of the APC System or any portion thereof.
29.5 If APC determines that SI's activities pursuant to this Agreement in
any APC facility are causing or will cause labor difficulties for APC, SI agrees
to discontinue those activities until the labor difficulties have been resolved;
provided, that in any such event and notwithstanding any other provision of this
Agreement, APC shall during the pendency of such labor difficulties perform at
its own expense any such activities that may be reasonably necessary to the
operation and maintenance of the SI System or any portion thereof.
ARTICLE 30. BENEFITED PARTIES
30.1 Each of the Parties hereto understands and agrees that the other
Party is entering into this Agreement not only for its own benefit but also and
equally for the benefit of its parent company and affiliated companies, present
and future, and that each and every right, benefit, remedy, license and warranty
accruing to such Party hereunder likewise accrue to its parent company and
affiliates, including but not limited to the right to enforce this Agreement in
their respective names; provided, however that in no event shall any provision
of this Agreement be construed as making the parent company or any affiliate of
either Party liable for any charges or other amounts due hereunder, except to
the extent that the parent company or any affiliate shall have separately
obligated itself as a guarantor.
ARTICLE 31. EXERCISE OF RIGHT
31.1 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 operated 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.
ARTICLE 32. ADDITIONAL ACTIONS AND DOCUMENTS
32.1 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.
Page 22 of 23
<PAGE>
ARTICLE 33. SURVIVAL
33.1 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.
ARTICLE 34. HEADINGS
34.1 Article 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 defined or affect the
meaning, construction or scope of any of the provisions hereof.
ARTICLE 35. INCORPORATION OF EXHIBITS
35.1 The Exhibits referenced in and attached to this Agreement shall be
deemed an integral part hereof to the same extent as if written at length
herein.
ARTICLE 36. GOVERNING LAW
36.1 The validity, interpretation and performance of this Agreement and
each of its provisions shall be governed by the laws of the State of Alabama.
ARTICLE 37. COUNTERPARTS
37.1 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 of the counterparts. All counterparts shall collectively constitute
a single agreement. It shall not be necessary in any proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of or on behalf of all of the parties.
ARTICLE 38. ENTIRE AGREEMENT
38.1 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.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed on their behalf, as of the day and year first hereinabove set forth.
ALABAMA POWER COMPANY SOUTHERN INTEREXCHANGE FACILITIES, INC.
By: /s/ Travis J. Bowden By: /s/ Tom Mullis
------------------------------- -----------------------------------
Name: Travis J. Bowden Name: Tom Mullis
----------------------------- ---------------------------------
(Printed or typed) (Printed or typed)
Title: Executive Vice-President Title: President
---------------------------- --------------------------------
Page 23 of 23
<PAGE>
ROUTE SEGMENT TO BE CONSTRUCTED
-------------------------------
EXHIBIT A TO APC
CONTRACT #SI001
PAGE 1 OF 3
<TABLE>
<CAPTION>
CABLE
CONSTRUCTION ORDER ROUTE
COMPLETION FIBER TYPE LENGTH LENGTH
ROUTE SEGMENT 1 DATE COUNT CONSTRUCTION (MILES) (MILES)
- --------------- ------------ ----- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Fultondale 24 OPGW 6.16 5.91
Substation to (6
Boyles Substation Primary)
Boyles Substation 24 OPGW 3.91 3.79
to East (6
Birmingham Primary)
Substation
East Birmingham 36 OPGW 1.98 1.88
Substation to (6
Northside Primary)
Substation
Northside 42 UG 1.89 1.53
Substation to (12
Parkwest Primary)
Substation
Parkwest 36 Self Support 1.89 1.48
Substation to (6 Dielectric
Sprint POP to Primary)
AT&T Duct
------- -------
Total 15.83 14.59
</TABLE>
SI DESIGNATED FIBER ACCESS POINTS:
- ---------------------------------
- - East Birmingham Switching Station
- - MCI POP (Birmingham)
- - Telecom USA POP (Birmingham)
- - APC Corporate Headquarters
- - Sprint POP (Birmingham)
<PAGE>
ROUTE SEGMENT TO BE CONSTRUCTED
-------------------------------
EXHIBIT A TO APC
CONTRACT #SI001
PAGE 2 OF 3
<TABLE>
<CAPTION>
CABLE
CONSTRUCTION ORDER ROUTE
COMPLETION FIBER TYPE LENGTH LENGTH
ROUTE SEGMENT 2 DATE COUNT CONSTRUCTION (MILES) (MILES)
- --------------- ------------ ----- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Farley Nuclear 12 OPGW 17.72 17.10
Plant to Webb (6
Substation to Primary)
Dothan Substation
Dothan Substation 24 OPGW 112.27 108.55
to Pinckard (6
Substation to Primary)
Snowdown
Substation to
Montgomery
Switching
Substation
Montgomery 36 OPGW 4.42 4.16
Switching (12
Substation to Primary)
West Montgomery
Substation to
Whitman Street
Substation ------ ------
Total 134.41 129.81
*Whitman Street 36 UG/Self
Substation to (12 Support
APC Southern Primary)
Division Office
*APC Southern 36 UG
Division Office (6
to SI POP Primary)
*APC Southern 36 UG
Division Office (6
to Sprint POP Primary)
</TABLE>
SI DESIGNATED FIBER ACCESS POINTS:
- ---------------------------------
- - Sprint POP (Montgomery)
- - APC Southern Division Office
- - SI POP (Montgomery)
- - Montgomery Switching Station
- - SI POP (Dothan)
- - Williams Telecommunications
* Route Length and Cable Order Lengths have not been determined and will be
provided to SI prior to construction start.
<PAGE>
ROUTE SEGMENT TO BE CONSTRUCTED
-------------------------------
EXHIBIT A TO APC
CONTRACT #SI001
PAGE 3 OF 3
<TABLE>
<CAPTION>
CABLE
CONSTRUCTION ORDER ROUTE
COMPLETION FIBER TYPE LENGTH LENGTH
*ROUTE SEGMENT 3 DATE COUNT CONSTRUCTION (MILES) (MILES)
- ---------------- ------------ ----- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
East Birmingham
Substation to
Montgomery
Switching Station
to APC Southern
Division Office
-----
Total *105
</TABLE>
SI DESIGNATED FIBER ACCESS POINTS:
- ---------------------------------
- - Montgomery Switching Substation
- - East Birmingham Switching Station
* Preliminary Engineering for this route has not been accomplished. All Route
Parameters will be provided to SI prior to construction start.
<PAGE>
COST
EXHIBIT B to APC
Contract Number SI001
Page 1 of 1
<TABLE>
<CAPTION>
ROUTE SEGMENT NUMBER FROM/TO ESTIMATED COST
- -------------------- ------- TO CONSTRUCT
-------------
<S> <C> <C>
1 Fultondale TVA $ 742,000
Substation to AT&T
Duct
2 From Montgomery to $ 5,815.440
Farley Nuclear Plant
3 From Birmingham to $ 4,580,000
Montgomery
</TABLE>
<PAGE>
MAINTENANCE AND OPERATING PLAN
EXHIBIT C to APC Contract Number
SI001
Page 1 of 6
A. GENERAL
-------
1. The following information describes the maintenance, operating and
interface procedures associated with the Agreement between SI and
APC.
2. This Exhibit documents day-to-day operations and restoration
activities. Changes to this document must be agreed to by both
parties.
3. Over the life of the Agreement there will be periodic local
contacts or meetings at specified intervals to:
a. Verify maintenance arrangements
b. Clarify positions
c. Update contacts and telephone numbers
d. Solve problem areas or disagreements
4. Significant changes to the maintenance, operating and interface
plans or procedures will be annexed as an addendum to this Exhibit
C.
5. Where SI provides network services to APC, these services will be
integrated with other network services residing on SI fiber pairs.
6. APC equipment associated with these services must be Dual DS3
Multiplexer 1000 or CB149 compatible.
B. WORK CENTER AND INTERFACE PROCEDURES
------------------------------------
1. The primary focal points for trouble reporting, scheduling
coordination and escalation will be between the SI facility known
as the Network Control Center, "NCC", (24 HOUR COVERAGE), and the
affected SES Telecommunication Control Center, "TCC", (24 HOUR
COVERAGE).
2. SI NCC
SI Facilities, Inc.
113 South Main Street
Arab, Alabama 35016
a. Contact: NCC
Telephone: 586-1500
<PAGE>
EXHIBIT C to APC Contract Number
SI001
Page 2 of 6
b. Contact: Ms. Martha Stewart
Telephone: 586-1500
c. Contact: Mr. Ron King
Telephone: 586-7101
3. SES TCC
Southern Company Services, Inc.
800 Shades Crest Parkway
Birmingham, Alabama 35209
205-870-6305
a. Contact: Tim D. Ford
Telephone: 205-870-5900 (W)
205-472-2203 (H)
b. Contact: Andrew B. Moore
Telephone: 205-870-6876 (W)
205-678-9531 (H)
C. CONSTRUCTION AND SERVICE PROVISIONING
-------------------------------------
1. Construction will be managed as an APC project. Cable
delivery, equipment delivery and construction schedules will be
coordinated, published and distributed to both companies.
2. Any deviation from these schedules requires notification to the
other party.
3. APC will notify SI of static line/fiber placement and splice box
installation as the work is completed.
4. SI will notify APC of New Buildings and equipment placements as
well as splice completions and when the fiber is considered ready
for service.
5. All network services provided to APC will be tested for pre-service
using existing standard SI methods, procedures and performance
parameters.
6. Continuity testing for connection of end-to-end services will be
scheduled and coordinated by the SI NCC and the SES TCC to ensure
compatibility.
7. The SI NCC and the SES TCC will agree that the service has been
tested, meets requirements and is being placed into service.
<PAGE>
EXHIBIT C to APC Contract Number
SI001
Page 3 of 6
8. The results from each test sequence will be documented and will
serve as a benchmark for future tests.
9. If a facility fails the test by a small margin it will be re-
tested. In a re-test situation, the section or path must remain in
limits for two (2) consecutive test intervals. If the path or
section fails the re-test or initial tests results indicate the
facility fails by a large margin, fault locating and trouble
clearing procedures will be initiated to clear the trouble.
D. CONSTRUCTION LOSS REQUIREMENTS
------------------------------
1. The Outside Plant Loss (OSPL) cannot exceed -20 decibels on any
span. OSPL is the fiber and splices that make up the optical path
between Lightguide Stranded - Cable Interconnect Terminals or
Universal Splice Enclosures at terminals or line repeater stations.
The fiber is tested for span loss at 1310 nm and 1550 nm.
2. Tests will be made with an Optical Time Domain Reflectometer (OTDR)
and the fiber is characterized for 1310 nm and 1550 nm. Current SI
standards and experience will determine acceptability of the fiber.
This includes checks for micro-bending at both frequencies. The
APC and SI fibers will be required to meet the same levels of
performance. Span loss and micro-bending will normally indicate
typical fiber and splice problems.
3. The fiber will be re-tested annually to ensure continued
performance capability. Any variance will be isolated and
corrected.
E. ADMINISTRATIVE
--------------
1. Performance reports and/or frequency of reports concerning the
performance monitoring of network services will be developed
between the SES TCC and the SI NCC. It is expected that
performance will be based on SI standards in effect during the life
of the Agreement.
2. APC will furnish to SI the location numbering plan and road access
maps to the rights-of-way (Route Maps), each individual
tower/splice location and substations where SI equipment/stations
are located.
<PAGE>
EXHIBIT C to APC Contract Number
SI001
Page 4 of 6
3. APC will notify the SI NCC of any hazardous conditions that arise
along the right-of-way or at sub or repeater stations that could
affect service. Clearance of these conditions will be reported.
4. APC will notify the SI NCC of any hazard or condition that may
jeopardize safety of SI personnel. Expected time of clearance and
final clearance will also be reported.
5. APC will notify SI of any special right-of-way or property owner
problems or considerations. In addition, any conditions that may
restrict access to splice locations or New Buildings will be
reported.
6. APC will if needed and upon request, provide temporary special
arrangements for access and/or transportation to allow SI personnel
to reach the necessary work location.
7. APC will be responsible for property owner relations.
8. APC and SI field forces will develop and coordinate contingency
plans for physical restoration pertaining to crucial locations such
as highway crossing, rivers, etc. These plans will be furnished to
both the SI NCC and the SES TCC as well as to field personnel
responsible for those locations.
9. Safety procedures are an annex to this Exhibit C.
F. DAMAGE REPORTING AND RESTORATION
--------------------------------
1. The SI NCC will notify the SES TCC immediately of locations
experiencing failure indications. APC will notify SI NCC
immediately of the nature, location and any pertinent information
concerning the Cable Route Segment or New Building damage.
2. APC will provide a list of APC locations where spare Cable,
provided by SI, if any, will be stored.
3. APC will notify the SI NCC of the estimated time of arrival of the
permanent replacement cable at the fault location.
4. Field site managers for each company will be designated and their
identity will be provided to the SI NCC and SES TCC respectively
for the coordination of communications.
<PAGE>
EXHIBIT C to APC Contract Number
SI001
Page 5 of 6
5. The SES TCC will provide status reports to the SI NCC at least
hourly concerning progress of restoration and estimated time that
SI personnel may begin work at the fault location.
6. APC will notify SI when it is safe for personnel to begin work.
a. At temporary or permanent repair splice locations, it is
agreed that SI will be allowed to perform any parallel work
which can be performed safely and is agreed to by the field
site managers.
b. Standard SI physical restoration techniques, fiber splicing
priorities and order of splicing methods will be used.
7. The SI NCC will provide status to the SES TCC, at least hourly, of
the estimated time of restoration of APC services.
8. The replacement cable performance will be tested and verified by SI
field and NCC forces using SI standard procedures, test
equipment/computerized test systems and existing performance
criteria.
9. If temporary cables, supplied and stored by SI, are used for
restoration, APC will notify the SI NCC when the placement of
permanent cable can be scheduled and when placement has been
completed. This will allow SI to schedule and perform permanent
splicing.
10. SI may place temporary New Buildings at or near the site of
existing buildings when necessary to restore service to those
buildings or equipment.
G. MAINTENANCE AND TROUBLE REPAIR
------------------------------
1. The SES TCC will notify the SI NCC when any work is scheduled or
performed on APC equipment which may generate an alarm or threshold
violation to SI monitored equipment or locations.
a. SI standard thresholds of performance will be used to detect
trouble or deterioration.
b. SI will notify APC when threshold violations are indicative
of trouble or repair. Access by SI to splice sites for
routine maintenance, inspection and other activities will be
coordinated between local field forces.
<PAGE>
EXHIBIT C to APC Contract Number
SI001
Page 6 of 6
2. SI may place signs and markings on New Buildings where both
companies share sites and may place markers and signs to mark
underground cables between APC facilities and New Buildings.
Overall appearance of buildings and grounds will be managed by
local SI and APC field forces.
3. Where practical, the static line will be extended from the APC
facility to a pole near the New Building. The static line will be
brought down the pole to a splice box where a non-metallic fiber
cable will be spliced to the fiber of the static line. From the
splice box the Cable will be encased in U-Guard down the rest of
the pole and placed below ground to the New Building.
H. RELOCATIONS
-----------
1. Proper notice as required by the Agreement shall be furnished to
the SI NCC and the SES TCC.
2. Engineering information for the route section to be relocated,
including tower and splice location of the exiting and relocated
route section, shall be furnished to the SI NCC and the SES TCC.
3. All new construction shall be complete and tested prior to cutting
service from the existing to the relocated Route Segment.
4. Transfer of service shall be coordinated between Field Operations,
the SI NCC and the SES TCC.
5. All safety and installation procedures in other sections shall
apply to relocations.
<PAGE>
TELECOMMUNICATIONS SAFETY PROCEDURE
Annex 1 to EXHIBIT C to APC
Contract Number SI001
Page 1 of 2
SUBJECT: FIBER SPLICING ON OPGW
INTRODUCTION
- ------------
The purpose of this procedure is to establish a policy for the safe
operation of equipment and personnel in the installation and maintenance of
splices in the OPGW (composite fiber optic overhead ground wire).
PRIORITY
- --------
No work shall be performed until line personnel have taken appropriate
action, as defined by various operating and transmission bulletins, to ensure
that the work environment is free from any electrical and mechanical hazards.
GENERAL
- -------
1. The vehicle cab and body shall be bonded to the chassis.
2. A stirrup or stud shall be welded to the truck or van chassis front
and rear or a grounding reel shall be bonded to the chassis.
3. A 1/0 copper ground cable with accepted clamp shall be used to ground
the vehicle and the OPGW cable to the structure ground.
4. All grounds shall be attached to the pole or structure permanent
ground.
OPERATING AT THE JOB SITE
- -------------------------
The following conditions shall be met before splicing operations can
begin:
1. Permission shall be received from line personnel to begin work. Line
personnel are responsible to take down and store the splice case.
2. Approved rubber overshoes shall be worn at all times for additional
protection by personnel at the transmission line work site.
3. The two (2) OPGW leads shall be bonded together and to the structure
ground.
4. The vehicle chassis shall be grounded to the same structure ground.
<PAGE>
Annex 1 to EXHIBIT C to APC
Contract Number SI001
Page 2 of 2
5. If a metallic strength member is used in the OPGW, it shall be
grounded during splicing operations and during storage.
6. After completion of the work, the removal of the grounds shall be the
last function accomplished prior to leaving the work area.
7. At no time during the application or removal of grounds should a
person allow himself to be in series with OPGW and the ground lead.
8. Hard hats shall be worn at the work site.
EMERGENCY PERSONNEL
- -------------------
In an emergency situation, such as a line down condition,
Telecommunications personnel shall wait for line personnel to secure and ground
the OPGW leads and determine that the work area is safe.
<PAGE>
Exhibit 10.27
AMENDMENT TO AN
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC FACILITIES AND SERVICES
THIS AMENDMENT made and entered effective as of the 29th day of March,
1990, by and between SOUTHERN INTEREXCHANGE FACILITIES, INC. (hereinafter
referred to as "SI"), an Alabama corporation with its principal place of
business located at 113 1/2 South Main Street, Arab, Alabama 35016, and ALABAMA
POWER COMPANY, (hereinafter referred to as "APC"), an Alabama corporation with
its principal place of business located at 600 North 18th Street, Birmingham,
Alabama 35291.
W I T N E S S E T H
WHEREAS, the parties hereto have heretofore entered an Agreement, dated to
be effective as of the 29th day of March, 1990, which Agreement provides for the
provision of certain fiber optic facilities and services and which is hereby
incorporated herein by reference; and
WHEREAS, the parties deem it to be in their mutual interest to amend said
Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and the further sum of One Dollar by each party in hand paid to
the other, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1. By adding and inserting in Article 5.1, the following provision:
<PAGE>
"Provided, however, that APC shall not be obligated to permit, and SI may
not elect to choose, reimbursement of APC costs in installments, but on the
contrary, may only reimburse APC on a monthly basis, as hereinabove
provided, unless and until such time as APC receives such guaranty or
guaranties of the payment of said installments in such form and from such
entities or persons as APC shall, in its sole judgment, determine."
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed on their behalf, as of the day and year first hereinabove set forth.
ALABAMA POWER COMPANY
BY: /s/ Travis J. Bowden
------------------------------
Name: Travis J. Bowden
----------------------------
Title: Executive Vice-President
---------------------------
SOUTHERN INTEREXCHANGE FACILITIES, INC.
BY: /s/ Tom Mullis
------------------------------
Tom Mullis
It's President
<PAGE>
Exhibit 10.28
AMENDMENT NO. 1 TO
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC FACILITIES AND SERVICES
BETWEEN
ALABAMA POWER COMPANY AND
SOUTHERN INTEREXCHANGE FACILITIES, INC.
APC CONTRACT NUMBER SI001
THIS AMENDMENT, effective as of the 22nd day of March, 1991, is made by
and between ALABAMA POWER COMPANY (hereinafter referred to as "APC") and
SOUTHERN INTEREXCHANGE FACILITIES, INC. (hereinafter referred to as "SI"),
parties to the Agreement for the Provision of Fiber Optic Facilities and
Services, APC Contract Number SI001 (hereinafter referred to as the
"Agreement"), and sets forth the modifications to the Agreement as hereinafter
described.
WITNESSETH:
WHEREAS, APC and SI entered into the Agreement which provides for the use
of certain designated fibers which have been or will be placed in the static
wire which is a part of APC's transmission lines, which APC utilizes to operate
a fiber optic transmission system; and
WHEREAS, pursuant to the Agreement SI, as a condition of its use of certain
designated fiber optic cables, shall reimburse APC's Actual Cost, as defined
below, of constructing, installing and maintaining such fiber optic cables; and
WHEREAS, the parties desire that APC construct, install and maintain
certain transport electronics equipment in SI's Network on Route Segment No. 2,
in accordance with the terms and conditions of the Agreement as amended herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises hereinafter set forth the parties agree to amend the
Agreement as follows:
1. The parties agree that APC will install and maintain a transport
electronic equipment system in SI's Network located on Route Segment No. 2
(hereinafter the "APC Equipment") in accordance with the Agreement and this
Amendment. APC shall also engineer, in consultation with SI, the APC Equipment.
The APC Equipment shall, during the term of this Amendment, comply with AT&T
Compatibility Bulletin No. 119 (TA-34), dated October, 1979, and Bellcore's
Technical Publication 62508, and shall provide to SI a monitoring signal which
conforms to and is compatible with TBOS Telemetry Protocol.
2. SI shall reimburse APC for APC's Actual Cost, as defined in the
Agreement, of engineering and installation of the APC Equipment. SI shall also
reimburse APC for APC's Actual Cost of maintenance of the APC Equipment. Such
reimbursement shall be made
<PAGE>
pursuant to the Agreement. Regarding maintenance costs, APC agrees to cap APC
Equipment maintenance costs during the term of this Amendment at a total of
$50,000 for the entire term hereof. If at any time maintenance costs exceed
this cap, SI agrees to reimburse APC, for the remaining term of this Amendment,
an amount equal to SI's proportion of the total capacity of the APC Equipment at
the time such maintenance charges exceed this cap. Maintenance costs as they
apply to the $50,000 cap are hereby defined as all costs incurred for
maintaining the APC Equipment, excluding damages caused by casualty.
3. APC shall maintain the APC Equipment in accordance with the applicable
standards set forth in this Amendment for end-to-end maintenance. The standards
for restoral services for the APC Equipment shall be at least as high as those
standards utilized by APC for the restoral of other portions of its internal
communication systems. APC agrees to dispatch its service technicians so as to
arrive on site within four (4) hours of the detection or notification of APC
Equipment problems. APC further agrees that if APC determines that it will not
be able to provide maintenance and restoral services as described above in a
timely manner due to other priorities or other situations as they may arise,
then APC will grant verbal authorization to SI to provide maintenance and
restoral services to such APC Equipment.
4. SI's obligation to reimburse APC for APC's Actual Cost in connection
with APC's operation, maintenance and repair of the APC Equipment shall
terminate upon the expiration of the term of this Amendment or prior termination
as provided in this Amendment.
5. APC shall be responsible for obtaining the APC Equipment described in
the attached Exhibit "A". Should APC be successful in constructing and
installing the Cable on Route Segment Number 2 for an average Actual Cost of
$12,000 or less per mile, excluding the acquisition cost of the Cable and the
cost of the splices, resulting in APC earning the right to payment of the
maximum allowable incentive payments as provided in Subarticle 5.1 of the
Agreement, then, and in that event, SI shall reimburse APC for the Actual Cost
of the APC Equipment in lieu of payment of the incentive payments due APC and
title to the APC Equipment shall remain in APC. Should APC not be successful in
constructing and installing the Cable on Route Segment Number 2 as provided in
this paragraph, then, and in that event, APC shall elect to either (i) pay to SI
the amount of the difference between the maximum incentive available under
Subarticle 5.1 and the actual incentive earned or (ii) terminate this Amendment
at any time, but in any event not later than one year from the date hereof, and
receive any and all incentive payments due APC as provided in Subarticle 5.1 of
the Agreement. Should APC elect to terminate this Amendment as provided herein,
all rights, title and interests to the APC Equipment shall vest in SI
immediately upon SI's receipt of written notification of APC's election to
terminate and operation,
2
<PAGE>
maintenance and restoral of APC Equipment shall be governed by the Agreement.
Upon installation of the APC Equipment, and payment in full of all amounts due
APC under the terms of the Agreement and this Amendment with respect to the APC
Equipment, SI shall have the right to terminate this Amendment at any time
thereafter upon written notice to APC, and shall have no further liability to
APC under this Amendment.
6. The APC Equipment to be installed under this Amendment shall have a
capacity to 12 DS-3s, of which SI shall initially be entitled to a capacity of 9
DS-3s. As APC's needs for capacity on such APC Equipment increase, as
determined by APC, APC shall be entitled to additional capacity, provided that
APC shall give SI six (6) months written notice prior to the in-service date of
any increase in APC's capacity requirements. APC agrees that it will, during
the term of this Amendment, assure SI of capacity in the APC Equipment of 6 DS-
3s. Should APC require more than 6 DS-3s of capacity during the term of this
Amendment, SI agrees to provide one (1) pair of dark fibers on Route Segment No.
2 to APC for APC to install additional transport electronics and to utilize the
same for APC's increased capacity requirements during the term of this
Amendment.
7. APC shall have absolute legal title to and beneficial ownership of the
APC Equipment, unless said ownership rights are conveyed by APC pursuant to
Paragraph 5 of this Amendment. Legal title to any item attached to APC
Equipment, excepting any item solely for the exclusive use and benefit of SI,
which is purchased or obtained initially by SI shall vest in APC upon delivery
of such item to APC.
8. If all or any APC Equipment is damaged or destroyed by casualty, APC
shall promptly repair, restore or replace the APC Equipment. Provided, however,
that nothing herein shall be construed to preclude APC 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 APC's judgment is immediately necessary to provision of electric power
service) than to the restoration of service hereunder. Should APC determine that
it will not be able to provide repair, restoral or restoration services as
described above promptly, APC shall grant verbal authorization to SI to provide
repair, restoral and replacement services to APC Equipment.
9. The repair, restoration and replacement of the APC Equipment shall be
at the sole expense of SI as provided herein; provided, however, that if any APC
Equipment located in the SI Network is damaged or destroyed due in whole or in
part to the negligence or willful misconduct of APC, then APC shall bear the
proportion of the cost of APC repairing, restoring or replacing of such APC
Equipment for the damage to or destruction of which it is
3
<PAGE>
causally responsible.
10. SI agrees, upon reasonable request and as reasonably required to allow
APC direct ingress and egress to all APC Equipment, and to permit APC to be on
SI's premises at such times as may be required for APC to perform any
appropriate maintenance and repair of APC Equipment. SI may require that a
representative of SI accompany any representatives of APC having access to the
APC Equipment. Employees and agents of APC shall, while on the premises of SI,
comply with all rules and regulations, including without limitation security
requirements and, where required by government regulations, receipt of
satisfactory governmental clearances. APC shall provide to SI a list of APC's
employees or authorized APC designee employees who are performing work on, or
who have access to, the APC Equipment. SI shall have the right to notify APC
that certain APC or authorized APC designee employees are excluded if, in the
reasonable judgment of SI, the exclusion of such employees is necessary for the
proper security and maintenance of SI's facilities.
11. This Amendment shall expire on June 1, 1998 unless sooner terminated
as provided herein or in the Agreement. Provided, however, that APC may, at
its option, extend the term of this Amendment for a mutually agreeable period of
time.
12. Except as provided in Paragraph 5 of this Amendment, upon expiration or
termination of this Agreement for any reason, SI shall have no further
beneficial use of or any rights or interest in the APC Equipment; APC shall have
absolute legal and beneficial ownership of the APC Equipment and such APC
Equipment shall thereafter be governed by the Agreement.
Except as modified by this Amendment, all terms and conditions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed on their behalf, as of the day and year first hereinabove set forth.
ALABAMA POWER COMPANY SOUTHERN INTEREXCHANGE
FACILITIES, INC.
By: /s/ J. M. Corbitt By: /s/ Melvin R. Patterson
--------------------------------- ------------------------
Name: J. M. Corbitt Name: Melvin R. Patterson
------------------------------- ----------------------
(Printed or typed) (Printed or typed)
Title: Vice President - Information Title: Vice President
Resources ----------------------
----------------------------
4
<PAGE>
Exhibit 10.29
AMENDMENT NO. 2 TO
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC FACILITIES AND SERVICES
BETWEEN
ALABAMA POWER COMPANY AND
SOUTHERN INTEREXCHANGE FACILITIES, INC.
APC CONTRACT NUMBER SI001
THIS AMENDMENT, effective as of December 1, 1991, is made by and between
ALABAMA POWER COMPANY ("APC") and SOUTHERN INTEREXCHANGE FACILITIES, INC.
("SI"), parties to the Agreement for the Provision of Fiber Optic Facilities and
Services, APC Contract Number SI00l, dated as of March 29, 1990 and amended on
March 29, 1990 and March 22, 1991 (the "Agreement").
WITNESSETH:
WHEREAS, APC desires to obtain sole and exclusive ownership and use of the
fibers within that portion of Route Segment 1 which is located between the MCI
POP at Park Place Tower and the Telecom POP at 600 N. 18th Street, Birmingham,
Alabama (the "APC Segment"), and SI desires to relinquish its beneficial
ownership in such fibers in return for reimbursement of amounts paid to APC as
Actual Cost for the construction of the APC Segment; and
WHEREAS, the parties deem it to be in their mutual interest to amend the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises hereinafter set forth, the parties agree to amend the
Agreement as follows:
1. In consideration of SI's relinquishment of its interest and rights in
the APC Segment, APC hereby agrees to pay SI the sum of sixteen thousand one
hundred thirty and 70/100 dollars ($16,130.70). APC shall owe no further
amounts, and SI shall have no right to additional compensation of any kind, with
respect to the APC Segment.
2. As of the effective date hereof, APC shall have the absolute and
exclusive title, beneficial ownership and interest in the Cable, fibers,
equipment and associated facilities in, on or used in connection with the APC
Segment, including without limitation the right to use the fibers for any
purpose whatsoever. From such effective date, SI shall have no further rights or
interest in the APC Segment, and the APC Segment shall not be governed by or
subject to the Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed on their behalf, as of the day and year first above written.
ALABAMA POWER COMPANY SOUTHERN INTEREXCHANGE
FACILITIES, INC.
By: /s/ J. M. Corbitt By: /s/ Melvin R. Patterson
------------------------- ---------------------------
Name: J. M. Corbitt Name: Melvin R. Patterson
----------------------- -------------------------
(Printed or Typed) (Printed or Typed)
Title: Vice President Title: Vice President
---------------------- ------------------------
Information Resources
<PAGE>
Exhibit 10.30
AMENDMENT NO. 3 TO
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC FACILITIES AND SERVICES
BETWEEN
ALABAMA POWER COMPANY AND
SOUTHERN INTEREXCHANGE FACILITIES, INC.
APC CONTRACT NUMBER SI001
This Amendment, effective as of September 23, 1992, is made by and
between Alabama Power Company ("APC") and Southern Interexchange
Facilities, Inc. ("SI"), parties to the Agreement for the provision of Fiber
Optic Facilities and Services, APC Contract Number SI00l, dated as of March 29,
1990 and amended on March 29, 1990, March 22, 1991, and December 1, 1991 (the
"Agreement").
WITNESSETH:
1. APC and SI for the same reasons and terms stated in the Agreement
hereby agree, for their mutual benefit, to add the below-described new Route
Segment 4 to the Agreement, such Route Segment No. 4 to be governed by the terms
and conditions of the Agreement.
<TABLE>
<CAPTION>
Route Segment 4 Construction Fiber Type
- -------------- ------------ ----- ----
<S> <C> <C> <C>
Complete Count/ Construction
Date (Primary)
From Central Bank 24 SM UG/Self
(on 32nd Street)
to Central Bank 24 MM Supporting
(on 20th Street)
to Daniel Building October 22, (6SM) Dielectric
(on 20th Street) 1992 (6MM)
</TABLE>
SI Designated Access Points are as follows:
- -- Central Bank 32nd Street
- -- Central Bank 20th Street
- -- Central Bank Daniel Building
2. SI will reimburse APC's Actual Cost for the construction and
installation of Route Segment No. 4 in accordance with the terms of the
Agreement.
3. Notwithstanding any other provisions of the Agreement, the Additional
Fibers on Route Segement 4 will be used by SI solely to provide services to
Central Bank for their internal uses and for access to SI facilities.
4. Except as modified by this Amendment, all terms and conditions of the
Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment No. 3 to
be duly executed as of the date stated above.
ALABAMA POWER COMPANY SOUTHERN INTEREXCHANGE
FACILITIES, INC.
By: /s/ James M. Corbitt By: /s/ Melvin R. Patterson
--------------------------- ------------------------------
Name: James M. Corbitt Name: Melvin R. Patterson
------------------------- ----------------------------
(Print or Type) (Print or Type)
Title: Vice President Title: Vice President
------------------------ ---------------------------
2
<PAGE>
Exhibit 10.31
AMENDMENT NO. 4 TO
AGREEMENT FOR THE PROVISION OF
FIBER OPTIC FACILITIES AND SERVICES
BETWEEN
ALABAMA POWER COMPANY AND
SOUTHERN INTEREXCHANGE FACILITIES, INC.
APC CONTRACT NUMBER SI001
THIS AMENDMENT, effective as of January 1, 1994, is to the Agreement for
the Provision of Fiber Optic Facilities and Services between Alabama Power
Company and Southern Interexchange Facilities, Inc., APC Contract Number SI00l,
dated as of March 29, 1990 and amended on March 29, 1990, March 22, 1991,
December 1, 1991 and September 23, 1992 (the "Agreement").
W I T N E S S E T H:
-------------------
WHEREAS, on or about December 30, 1993 Southern Interexchange Facilities,
Inc. ("SI"), a party to the Agreement, will merge with its affiliate, Delta
Communications, Inc. following which merger, Delta Communications, Inc. will be
the surviving corporation whose name shall be changed to DeltaCom, Inc.
("Delta"), an Alabama corporation; and
WHEREAS, Delta has agreed to assume all obligations of SI under the
Agreement, and
WHEREAS, Alabama Power Company ("APC") consents to the assignment of the
Agreement to Delta under the terms and conditions below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
1. Delta hereby certifies that SI has transferred to Delta all of its
rights, liabilities, titles, interest, responsibilities and obligations in, to
and under the Agreement which now exist or might hereinafter accrue to SI under
the Agreement, and APC hereby agrees to the substitution of Delta in lieu of SI
as the other party to the Agreement.
2. Delta hereby accepts and agrees to perform all the liabilities,
responsibilities, and obligations of SI under the Agreement and consents to be
bound by all of the terms and conditions thereof as fully and to the same extent
as if Delta had been the original party to the Agreement.
3. APC does hereby consent to the assignment of the Agreement and all of
the rights, obligations, responsibilities, liabilities, title and interest
thereunder to Delta. Following the effective date of this Amendment, wherever
"SI" appears in the Agreement, "Delta" shall be substituted therefor.
1
<PAGE>
4. The parties agree that Delta, having herein agreed to be bound by all
the terms and promises of the Agreement, shall not be required to sign a
counterpart of the Agreement pursuant to Article 22 of the Agreement.
5. It is expressly understood and agreed by and among the parties that
APC's consent to this assignment shall not be deemed or treated as a waiver on
APC'S part of the requirement of its approval of any future assignment, transfer
or substitution, nor shall such consent be deemed or treated as a waiver of any
of the terms and conditions of the Agreement, except as specifically provided in
paragraph 4, above, it being expressly agreed and understood that all of such
terms and conditions shall be and remain in full force and effect.
6. It is further understood and agreed by and among the parties that, by
agreeing to this amendment, Delta shall not be deemed to have waived any
provision of the Agreement, except as specifically provided in paragraph 4,
above, and particularly any provision of Article 22.1 of the Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Amendment No. 4 to be
duly executed as of the date stated above.
ALABAMA POWER COMPANY DELTACOM, INC.
By: /s/ Travis J. Bowden By: /s/ Foster McDonald
----------------------------- --------------------------
Name: Travis J. Bowden Name: Foster McDonald
--------------------------- ------------------------
(Print or type)
Title: Vice-President Title: President
--------------------------
2
<PAGE>
ADMINISTRATIVELY CONFIDENTIAL
Exhibit 10.32
AGREEMENT
dated as of
March 6, 1990
-------
BETWEEN
TENNESSEE VALLEY AUTHORITY
and
CONSOLIDATED COMMUNICATIONS CORPORATION
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
1. DEFINITIONS 4
2. GRANTS OF INDEFEASIBLE RIGHTS OF USE AND ACCESS 6
AND TERM OF AGREEMENT
3. OPTIONS TO EXTEND TERM AND RIGHTS 8
4. ROUTE DESIGNATION, CABLE, AND SYSTEM DESIGN 9
5. INSTALLATION AND MAINTENANCE OF SYSTEM 10
6. RELOCATION AND ABANDONMENT 12
7. LIABILITY: INDEMNITY 13
8. ASSIGNMENT, SUBLETTING, AND OTHER TRANSFERS 14
9. TERMINATION 14
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS 15
11. NOTICES 16
12. INDEPENDENT CONTRACTOR STATUS 17
13. MISCELLANEOUS 17
</TABLE>
-2-
<PAGE>
THIS AGREEMENT, made and entered into as of March 6, 1990, by and
-------
between the TENNESSEE VALLEY AUTHORITY ("TVA"), a corporation created by and
existing under and by virtue of the Tennessee Valley Authority Act of 1933, as
amended, and CONSOLIDATED COMMUNICATIONS CORPORATION ("CCC"), having its
principal office at 113 1/2 South Main Street at Arab, Alabama 35016.
W I T N E S S E T H:
- - - - - - - - - -
Recitals:
--------
A. TVA placed an advertisement in the Commerce Business Daily in
-----------------------
May 1987 stating that TVA would consider proposals from responsible
communications carriers for joint construction of fiber optic systems along
certain transmission lines to support TVA's internal telecommunications needs.
B. A fiber optic cable system ("System") is to be constructed along the
Route, as defined in Section 4.2, to be incorporated into (i) CCC's intercity
communications link, and (ii) TVA's power grid communications system.
C. To enable TVA and CCC to construct, operate, maintain, and replace
the System, CCC requests from TVA and TVA has agreed to grant to CCC an
indefeasible right of use ("IRU") in and to the CCC Capacity, as defined in
Section 1.2, along the Route described in Section 4.2, upon and subject to the
terms and conditions set forth in this Agreement governing the design,
construction, operation, maintenance, and replacement of the System.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto hereby agree as
follows:
-3-
<PAGE>
1. DEFINITIONS
-----------
The terms defined in this Article shall, for all purposes of this
Agreement and all agreements supplemental hereto, have the meanings herein
specified.
1.1 "Acceptance of Construction" shall mean written notification from
CCC's Engineer that work has been performed substantially in accordance with the
approved plans.
1.2 "CCC Capacity" shall mean the telecommunications capacity provided
through the Cable to which TVA is granting CCC an exclusive right of use.
Except as otherwise agreed to by the parties, such CCC Capacity shall include
eighteen (18) optical fibers along the Route.
1.3 "Cable" shall mean the Composite Static Ground Wire, including
eighteen (18) optical fibers which will be provided by CCC and installed by TVA
along the Route.
1.4 "Chief Engineer" shall mean (i) the Vice President of Power
Engineering and Construction (or the designee thereof) in those instances where
TVA has primary responsibility for applicable tasks, and (ii) the Chief
Engineering Officer designated by CCC in those instances where CCC has primary
responsibility for applicable tasks.
1.5 "Composite Static Ground Wire" shall mean a composite cable
comprised of the power system overhead ground wire and optical fibers.
1.6 "Discontinuance" shall mean the continuing voluntary cessation of
use of the Cable for any telecommunication purpose (including redundancy) for a
period of at least twelve (12) months other than during periods of Unavoidable
Delays, maintenance, repair, restoral, alteration, or replacement.
1.7 "Discontinuance Notice" shall mean the notice which CCC is required
to give TVA upon planning a Discontinuance with respect to the System, setting
forth the proposed date and schedule for the Discontinuance.
1.8 "Engineer" shall mean the designated or authorized representative of
the applicable Chief Engineer.
1.9 "Force Majeure" shall mean a cause reasonably beyond the control of
the party affected such as, but not limited to, injunction, strike of the
party's employees, war, invasion, fire, accident, floods, backwater caused by
floods, acts of God, or inability to obtain or ship essential services,
materials, or equipment because of the effect of similar causes on the party's
suppliers or carriers.
-4-
<PAGE>
1.10 "GNP Deflator" shall mean the annual revisions to the GNP Implicit
Price Deflator Index published by the United States Department of Commerce. If
the GNP Deflator is changed, the GNP Deflator shall be converted in accordance
with the conversion factor published by the Department of Commerce. If the GNP
Deflator is discontinued, with no successor or comparable successor index, the
parties agree to select and substitute a mutually agreeable similar index.
1.11 "Maps" shall mean transmission system drawings to identify "as-
built" conditions, as updated from time to time.
1.12 "Rights-of-Way" shall mean the real property along the Route upon
which the transmission line structures are located, pursuant to subsisting
grants, easements, leases, licenses, or other agreements.
1.13 "Rights of Access" shall mean the right to enter certain property
held by TVA as is being granted to CCC by TVA in this Agreement.
1.14 "Rights of Use" shall mean the IRU and quiet enjoyment in and to
the CCC Capacity being granted to CCC by TVA along the Route.
1.15 "Route" shall mean the route as identified in Section 4.2.
1.16 "Splice" shall mean a point where two independent sections of the
Cable are physically joined.
1.17 "Static Ground Wire" shall mean an overhead ground wire.
1.18 "System" shall have the meaning set forth in recital paragraph B of
this Agreement.
1.19 "TVA Capacity" shall mean the telecommunications capacity described
in appendix B provided by CCC during the term of this Agreement and any
extensions which TVA Capacity, whether in use or in reserve, shall be provided,
in whole or in part, on or through the Cable over the Route; provided, however,
that if the Cable is not being used for telecommunications, CCC shall provide
TVA with alternate equivalent telecommunications capacity. TVA Capacity shall
be provided in Arab, Alabama, at TVA's Arab 161-kV substation in Birmingham,
Alabama, at Alabama Power Company's point of presence and at CCC's point of
presence, and in Montgomery, Alabama, at CCC's point of presence.
1.20 "Unavoidable Delays" shall mean delays on the part of one party due
to the other party's actions or omissions, Force Majeure, or other causes beyond
the reasonable control of the party claiming the Unavoidable Delay.
-5-
<PAGE>
2. GRANTS OF INDEFEASIBLE RIGHTS OF USE AND ACCESS
-----------------------------------------------
AND TERM OF AGREEMENT
---------------------
2.1 For the term hereof and the consideration hereinafter described, TVA
hereby grants to CCC and its successors and assigns:
(a) The Rights of Use in and to the CCC Capacity along the Route
which shall be provided through the Cable which shall be affixed to the
transmission line structures unless otherwise permitted herein;
(b) The right to be on, upon, over, across (hereinafter collectively
"within") the Rights-of-Way to the extent permitted in this Agreement; and
(c) CCC shall have the right, during the term of this Agreement, to
use existing TVA access roads, paths, and transmission line Rights-of-Way in
connection with activities on the System.
2.2 TVA guarantees that its Rights-of-Way agreements, including
easements, are adequate for a fiber optic telecommunications system as
contemplated in this Agreement. Should a question arise whether any of the
Rights-of-Way are adequate for any of the purposes of this Agreement, TVA will
attempt to resolve the question with the appropriate parties. In the event any
additional rights need to be acquired so that a Right-of-Way becomes adequate
for the purposes of this Agreement, TVA will acquire the right or rights. TVA
will bear the cost of obtaining any such additional rights up to a maximum
amount, which amount is the fair market value of the right or rights acquired as
determined by an MAI appraisal. (TVA shall bear the appraisal costs.) Any
costs or expenses in excess of the above-described fair market value shall be
borne solely by CCC. Instead of having TVA cure any such inadequacy, CCC may,
at its sole option, choose to (a) relocate the Cable, in which case TVA will
reimburse CCC for the costs and expenses CCC incurs in this relocation up to the
amount of the above-described fair market value; or (b) abandon the system upon
ten (10) days' written notice to TVA.
2.3 Except as otherwise provided herein, this Agreement shall become
effective as of the date first above written and shall continue in effect
through the Expiration Date as defined in Section 2.4 below.
-6-
<PAGE>
2.4 The Expiration Date of this Agreement shall be ten (10) years after
the date of the Acceptance of Construction for the System by CCC unless
(a) sooner terminated, by mutual agreement of the parties, by a Discontinuance
of the System by CCC, its successors or assigns, or any other party or
otherwise; (b) extended in accordance with Section 3.1 of this Agreement; or
(c) abandonment by CCC in accordance with Section 6.4 or by TVA in accordance
with Subsection 6.2(b). Such Acceptance of Construction for the System by CCC
shall not be unreasonably withheld and in no event shall exceed ninety (90) days
past the date of the notice of completion of construction by TVA.
2.5 As consideration for the grant of the Rights of Use and Rights of
Access herein contemplated (the "Consideration"), CCC shall provide TVA with:
(a) The initial and replacement Cable and associated hardware, which
shall meet or exceed the reasonable specifications provided by TVA (relative to
the ground wire specifications and hardware only) and CCC (relative to the
fibers only) attached hereto as appendix A;
(b) CCC will pay TVA on or before March 1, 1990, $500,000 by
electronic transfer. Upon completion and acceptance of the System, CCC will pay
TVA an additional $500,000 by electronic transfer;
(c) Beginning upon the date of the Acceptance of Construction and
continuing throughout the initial term, CCC shall pay TVA $100,000 annually in
advance;
(d) The TVA Capacity as listed in appendix B which is attached
hereto; and
(e) Title to the Cable and associated hardware (purchased or paid
for by CCC under the terms of this Agreement) affixed to TVA's transmission line
structures. Title to the Cable and associated hardware will pass to TVA upon
delivery to and acceptance by TVA.
-7-
<PAGE>
3. OPTIONS TO EXTEND TERM AND RIGHTS
---------------------------------
3.1 Subject to the provisions of this Section 3.1, CCC and its
successors and assigns shall have the right and option to extend the term of
this Agreement from the date upon which it would otherwise expire for up to four
(4) consecutive periods of five (5) years each ("Extension Periods"), provided,
however, that (a) if TVA has abandoned the transmission line structures along
the Route in accordance with Subsection 6.2(a), such extensions shall not be
renewed, or (b) if TVA has not abandoned the transmission line structures but is
no longer using them for power supply purposes, such extension may be renewed,
but CCC will pay TVA, after receipt of an invoice, the difference between the
cost and appropriate overheads for maintaining the transmission line structures
in the typical condition for TVA transmission line facilities that are not being
used for power supply purposes and the cost and appropriate overheads for
maintaining them as described in Section 5.6 of this Agreement. Such options to
extend the Agreement shall be deemed to have been exercised by CCC upon written
notice to TVA no later than six (6) months or earlier than twelve (12) months
prior to the expiration of the initial term or any of said Extension Periods, as
applicable. TVA will give CCC notice that the Agreement is about to expire
during the first ninety (90) days of the 12-month period immediately preceding
the expiration of the initial term or of any of the Extension Periods; provided,
however, that in the event TVA fails to provide this notice and CCC in turn
fails to notify TVA with respect to the Extension Period, CCC shall have sixty
(60) days from learning of its failure to provide the foregoing written notice
to notify TVA with respect to the Extension Period.
Should CCC choose to exercise its Discontinuance rights under
Section 6.3 with respect to the System, the provisions of this Agreement with
respect to such System shall be terminated and, except for CCC's obligations
referred to in Section 7.4 hereof, CCC shall have no further liability
thereunder, nor shall TVA have any further liabilities to CCC.
3.2 CCC shall be required to pay consideration during the Extension
Period(s). Such consideration will consist of an annual payment in advance.
The annual payment will be $100,000, adjusted to correct for the effects of
inflation and to maintain $100,000 of constant purchasing power by multiplying
such $100,000 figure (or portion thereof for partial years) by a fraction, the
numerator of which is the GNP Deflator for the year preceding the year in which
the adjustment is being made and the denominator of which is the GNP Deflator
for the year of expiration of the initial term of this Agreement.
-8-
<PAGE>
4. ROUTE DESIGNATION, CABLE, AND SYSTEM DESIGN
-------------------------------------------
4.1 TVA will be responsible for the engineering, design, installation,
and maintenance (excluding splicing) of the Cable and for all aspects of this
project which affect or potentially impact the operation of TVA's electric power
system. CCC shall be responsible for the design of all remaining plans that
affect the CCC Capacity and for performing all splicing on the System. All work
under this Agreement, whether performed by TVA or CCC, shall be performed in a
good, workmanlike manner and in compliance with all laws, ordinances, codes, and
regulations of any governmental authority having jurisdiction thereover, and
will be consistent with standard practices that are used throughout the
industry. TVA acknowledges that time is important in the performance of its
engineering, design, installation, and/or maintenance functions, and that TVA
will use its best efforts to perform these functions within a reasonable
timeframe.
4.2 The Route covered by the terms of this Agreement shall be along
TVA's Guntersville-Fultondale 115-kV transmission line Right-of-Way for a
distance of approximately fifty (50) miles beginning at a point approximately
ten (10) miles south of Arab, Alabama, where Highway 231 intersects TVA's Right-
of-Way and continuing southerly with an intermediate stop at a splice case on
the transmission line structure nearest to Locust Fork, Alabama, substation and
then (after signal regeneration) proceeding from the splice case to the
Fultondale, Alabama, substation.
4.3 CCC, at its own expense, will provide all initial Cable and
associated hardware as mutually agreed to by the parties on a timely basis which
does not adversely impact TVA's cost or schedule for such construction.
Thereafter, CCC shall provide all restoration and replacement Cable and
associated hardware necessary to enable TVA to perform its installation and
maintenance responsibilities herein.
4.4 In the event TVA incurs additional cost of construction specifically
due to CCC or CCC's suppliers of any and all Cable or associated hardware, CCC
agrees to pay TVA's additional cost plus applicable overheads.
-9-
<PAGE>
4.5 The parties may enter into future supplements to this Agreement
whenever CCC and TVA reach a mutual agreement to install additional fiber
segments along TVA's Rights-of-Way. This Section 4.5 reflects an attempt on the
part of TVA and CCC to foresee requirements for expansion of the System along
portions of TVA's Rights-of-Way not initially covered by this Agreement and is
merely an expression of the intent of CCC and TVA to work together in the future
when mutually beneficial. This provision shall not bind either CCC or TVA to
agree to future extensions of the System.
5. INSTALLATION AND MAINTENANCE OF SYSTEM
--------------------------------------
5.1 TVA shall remove a single existing Static Ground Wire and engineer,
design, and install a Composite Static Ground Wire along the Route. Installation
of the Cable, splice boxes, and associated hardware shall, to the extent
practicable, be carried out in accordance with a schedule to be prepared,
updated, and revised at regular intervals by TVA and CCC as applicable. TVA
shall use its best efforts to construct and install the Cable within the times
estimated in such schedule, but shall not be responsible for any consequential
or other damages due to TVA's or its contractors' or suppliers' inability to
meet such schedule.
5.2 TVA shall secure all applicable approvals, permits, and licenses
(collectively, "Approvals") from all governmental authorities and/or other
parties having jurisdiction or approval rights for those installation,
operation, and maintenance functions for which TVA has responsibility under
Article 4 of this Agreement. CCC shall obtain all required Approvals for those
functions for which CCC has responsibility. CCC and TVA agree to cooperate with
each other and to cause its personnel to render all reasonable assistance in the
procurement by the other party of Approvals.
5.3 CCC at its expense will be responsible for all initial and
maintenance splicing of the Cable. TVA will make the splice boxes and/or trays
readily available to CCC, and CCC will not, in any event, climb the transmission
line structures. All CCC employees, agents, and contractors that will be
working on TVA's Rights-of-Way will be required to attend a TVA-provided safety
course before commencing work.
5.4 TVA shall furnish CCC final "as-built" drawings within six (6)
months of the completion of construction, which drawings, as the same may be
amended from time to time, shall constitute the location of the System Route.
-10-
<PAGE>
5.5 Within thirty (30) days of notice of completion of construction of
the System by TVA, CCC shall cause its Engineer to inspect the System for
conformance with the plan design. Following such inspection, CCC shall furnish
TVA with either (a) an Acceptance of Construction of the System, or (b) a
statement setting forth in reasonable detail any bona fide objections to or
defects in the construction. Upon receipt of any such statement of bona fide
objections and/or defects, TVA shall, as soon as practicable, (a) either correct
the objections or defects in the construction, whereupon CCC's Engineer shall
reinspect the same within ten (10) days following notice from TVA that the work
has been corrected and, if found corrected, issue an Acceptance of Construction,
as aforesaid, or (b) dispute such statement of objections or defects, by
referring the disputed issues for determination in the first instance, and
without thereby waiving any rights in respect of the matter(s) in controversy,
to the Chief Engineers of both CCC and TVA. CCC's issuance of an Acceptance of
Construction, or statement of any objections to or defects in the construction
shall signify approval of or objections with respect to CCC's communications
system only and shall in no way be deemed to represent an opinion with respect
to the adequacy of TVA's power transmission system or the support thereof.
5.6 TVA (a) shall maintain and provide operational support for the Cable
and associated hardware except for splicing of the Cable, and (b) shall perform
routine maintenance on the Rights-of-Way and the transmission structures to
which the Cable is affixed for the term of this Agreement, except for the
provision described in Subsection 6.2(b) hereof, including any Extension
Periods.
5.7 Restoral of any of the Cable necessary due to incidents of Force
Majeure or otherwise beyond the control of either party will be at CCC's sole
cost and expense. TVA will use its best efforts to restore the Cable as soon as
possible, but TVA shall not be precluded from giving higher priority to the
restoration or preservation of electric power service. In the event CCC
determines, in its sole judgment, that Restoral of the Cable is not economical,
it may abandon the System upon ten (10) days' written notice to TVA.
5.8 TVA and CCC will develop and keep current ongoing maintenance,
replacement, and restoral procedures for the Cable and the System. At its own
expense, CCC will, on an ongoing basis, make available to TVA restoral Cable,
replacement Cable, accessories, supplies, and other necessary items as the
parties may agree are required in order for TVA to provide such maintenance and
operational support. In addition, each party shall provide the other a 24-hour
telephone number for the purpose of reporting problems with the System.
-11-
<PAGE>
5.9 CCC shall be permitted to have access to the CCC Capacity at any
splice point along the Route with TVA's oversight and prior approval, which
approval will not be unreasonably withheld or delayed. In all instances, TVA
will make available to CCC the splice boxes and/or trays which are located on
TVA structures.
6. RELOCATION AND ABANDONMENT
--------------------------
6.1 TVA shall be entitled to relocate, above or below ground, the System
or any portion thereof along the Route and shall not be restricted by this
Agreement as to the method of such relocation. TVA shall give CCC prior written
notice of such relocation as soon as possible, and shall use its best efforts to
give such notice no later than twelve (12) months before any relocation;
provided, however, that in situations which are beyond the control of TVA which
necessitate a shorter notice period, TVA shall give CCC the same amount of
notice regarding such relocation which was received by TVA. TVA shall provide
CCC with a plan for an alternative route as soon as practicable after such
notice. For involuntary relocations, TVA shall relocate the Cable at its
expense, and CCC shall (a) provide the required replacement Cable, accessories,
and any other material necessary to perform the relocation; or (b) abandon, in
its sole option, the entire system upon ten (10) days notice to TVA. If
relocating the System is a voluntary decision by TVA, TVA will pay all
relocation costs, including the cost of the Cable and associated hardware.
6.2(a) TVA shall be entitled to abandon its use of any part of the
electrical power system or Rights-of-Way along the Route of the System. TVA
shall give CCC prior written notice of such abandonment as soon as possible, and
shall use its best efforts to give such notice no later than twelve (12) months
before any abandonment; provided, however, that in situations which are beyond
the control of TVA which necessitate a shorter notice period, TVA shall give CCC
the same amount of notice regarding such abandonment which was received by TVA.
6.2(b) In the event CCC chooses to remain on the affected portion of the
System, at CCC's option, TVA shall (i) sell to CCC at TVA's salvage or book
value, whichever is less, any facilities located on said affected portion of the
System which CCC desires to retain, and (ii) use its best efforts to convey to
CCC any real property rights it has and can legally convey to CCC upon an
abandonment.
-12-
<PAGE>
6.2(c) In the event CCC chooses not to remain, this Agreement as it
applies to such abandoned portion of the System shall be terminated, and any
payments made to TVA for continued use of the System shall be prorated.
6.3 CCC shall, after giving the Discontinuance Notice to TVA at least
twelve (12) months before Discontinuance, have the right to discontinue its use
of the System, if it decides such Discontinuance is in CCC's best interests.
Upon discontinuance by CCC, the IRU of the fibers and any and all rights and
obligations of CCC shall revert to TVA, and CCC shall have no further
responsibility or obligation to TVA with respect to such facilities.
6.4 CCC may abandon use of the System as described in Sections 2.2, 5.7,
and 6.1. Upon abandonment by CCC, the IRU of the fibers and any rights of CCC
shall revert to TVA, and CCC shall have no further responsibility or obligation
to TVA (except for any that may exist under Article 7 and as described in this
Section 6.4) with respect to such facilities. In the event CCC abandons the
System, CCC agrees to provide TVA with equivalent telecommunications capacity to
that described in Exhibit B for a period of twelve (12) months after the
effective date of the abandonment or until TVA obtains replacement
telecommunications capacity, whichever is earlier.
7. LIABILITY; INDEMNITY
--------------------
7.1 CCC and TVA each hereby release the other and shall indemnify and
save harmless the other from any and all claims, demands, or causes of action
for personal injuries, property damage, or loss of life or property, including
the Cable, and all reasonable costs and expenses, including reasonable legal
fees, incurred in connection with actions arising out of or in any way connected
with their respective activities regarding the design, engineering,
installation, use, operation, maintenance, repair, defect, or failure of the
Cable except those personal injuries, property damage, or loss of life or
property caused or occasioned solely by the other's negligence.
-13-
<PAGE>
7.2 CCC shall indemnify and hold TVA harmless from and against any and
all liability, losses, damages, claims, or causes of action and expenses
connected therewith (including reasonable attorney's fees) asserted by them or
any of their customers by reason of any outage or interruption in the CCC
Capacity, including any failure to transmit messages accurately, even if such
outage, interruption, or failure was occasioned in whole or in part by TVA, its
agents, or employees; provided, however, that such indemnity shall not extend to
willful misconduct or gross negligence.
7.3 Neither party shall be liable to the other party for consequential
or other damages, including lost profits.
7.4 The obligations of the respective parties under this Article 7 shall
survive the Expiration Date in respect to any occurrences within the term.
8. ASSIGNMENT, SUBLETTING, AND OTHER TRANSFERS
-------------------------------------------
8.1 CCC and TVA, and their successors and assigns, shall have the right,
at any time and from time to time, to assign, sublease, license, and relinquish
possession or control of or otherwise transfer or apportion, in whole or in
part, their rights and/or interests (a) under this Agreement, or (b) in the
System.
8.2 Neither party shall be prohibited or restricted by this Agreement
from any merger or acquisition.
8.3 The obligations of both TVA and CCC under this Agreement shall be
binding upon the parties' respective successors and assigns. TVA and CCC, as
assignors under any transfer or assignment, will guarantee the obligations of
the transferee.
9. TERMINATION
-----------
9.1 This Agreement shall terminate upon the happening of any of the
following events:
(a) Upon the Discontinuance by CCC of the use of the CCC Capacity;
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<PAGE>
(b) Upon a breach or default by either party of any material
obligation hereunder, the nondefaulting party may (but is not obligated to)
terminate this Agreement by giving written notice to the other party specifying
the breach or default and stating that this Agreement shall terminate on the
date specified in such notice, which termination date shall be no less than ten
(10) days after the giving of such notice and upon such date this Agreement
shall terminate unless the other party has cured the default or breach in
question;
(c) Upon the subsequent written mutual agreement of the parties
hereto; and
(d) Upon the abandonment of the use of the System by TVA in
accordance with Section 6.2 or by CCC in accordance with Sections 2.2, 5.7, and
6.1.
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS
------------------------------------------
10.1 Entering into this Agreement with CCC for installation of the
herein described System shall in no way restrict TVA from installing other fiber
optic cables for any future use along this Route or other TVA transmission
routes, nor shall TVA be restricted in any way from entering into any
arrangements with any other parties for telecommunications systems. TVA's
future use of other telecommunications systems shall in no way be restricted by
this arrangement.
10.2 Should a sovereign act of the United States Government or a Force
Majeure make it commercially impracticable for either TVA or CCC to perform a
duty under this Agreement, performance of such duty shall be excused; provided,
however, that, if the duty being excused is material to the transaction
contemplated in this Agreement, the party whose performance would not be excused
under this Section 10.2 shall have the option to terminate the Agreement.
10.3 The TVA Capacity may be utilized only for TVA's own internal
communications purposes, and TVA may not resell or allow any third parties to
use the TVA Capacity except to the electric distributors of TVA power and other
electric utilities; the Corps of Engineers; the National Weather Service; other
Federal agencies; State emergency management associations; nonprofit
organizations involved with public
-15-
<PAGE>
safety; other parties with whom TVA interfaces as required by Federal law or
regulation; and other parties agreed to by CCC in CCC's sole discretion. Under
no circumstances may the parties being provided with telecommunications capacity
by TVA be allowed to resell such capacity. Nothing contained herein is intended
to deny TVA the right, and TVA shall have the right, to use the TVA Capacity for
TVA to communicate with any party whatsoever.
11. NOTICES
-------
11.1 Unless otherwise herein specifically set forth, all notices and
other communications concerning this Agreement shall be in writing addressed to:
CCC at: (one copy each to:)
President, Consolidated Communications Corporation
113 1/2 South Main Street
P.O. Box Drawer E
Arab, Alabama 35016
General Counsel, Consolidated Communications Corporation
113 1/2 South Main Street
P.O. Box Drawer E
Arab, Alabama 35016
TVA at: (one copy each to:)
Vice President of Power Engineering and Construction
1101 Market Street
Chattanooga, Tennessee 37402-2801
Vice President of Power Transmission and Customer Services
1101 Market Street
Chattanooga, Tennessee 37402-2801
or at such other addresses as may be designated in writing to the other party.
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<PAGE>
11.2 Unless otherwise herein set forth, notices shall be sent, postage
prepaid, either by registered or certified United States Mail, Return Receipt
Requested, or by overnight express delivery service, and shall be deemed served
or given when received by the addressee, as evidenced by the date of the return
receipt provided by the United States Postal Service or the delivery service, as
applicable.
11.3 During the term of this Agreement, CCC shall give TVA's Engineer
reasonable prior notice before entry upon any portion of the Rights-of-Way.
11.4 In case of emergency, including, without limitation, Cable breakage
or System failure, demanding immediate examination or repairs, notice of entry
shall be given by either party to the other in person or by telephone to the
Emergency Response Center(s) designated in writing by each party to the other.
Such notice, however, must be confirmed in writing within forty-eight (48) hours
of the initial verbal or telephonic notice. Notwithstanding anything in this
Article 11 to the contrary, TVA shall have the right to have a representative
present at any time that CCC, its employees, agents, and contractors are on the
Rights-of-Way.
12. INDEPENDENT CONTRACTOR STATUS
-----------------------------
12.1 TVA acknowledges and agrees that it reserves no control whatsoever
over the employment, discharge, compensation of, or services rendered by CCC's
employees or contractors, and it is the intention of the parties that CCC shall
be and remain an independent contractor, and nothing herein shall be construed
as inconsistent with that status or relationship or as creating or implying any
partnership or joint venture between CCC and TVA.
13. MISCELLANEOUS
-------------
13.1 No consent or approval required of any party pursuant to this
Agreement shall be unreasonably withheld or delayed.
13.2 Except as otherwise set forth in this Agreement, each party shall
be responsible for its own costs, including legal fees, incurred in negotiating
or finalizing this Agreement.
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<PAGE>
13.3 This Agreement expresses the entire understanding of the parties
relating to the subject matter hereof; all prior understandings, written or
oral, with respect to such subject matter are hereby merged herein and
superseded.
13.4 Neither this Agreement nor any term or provision hereof can be
amended, waived, modified, supplemented, discharged or terminated, except
by an instrument in writing signed by the party against which enforcement
thereof is sought and except as otherwise set forth herein.
13.5 This Agreement and any amendment, modification, waiver, or
supplement hereto may be executed by the parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original for all purposes, but all such counterparts shall together
constitute but one and the same instrument.
13.6 No member of or delegate to Congress or Resident Commissioner, or
any officer, employee, special Government employee, or agent of TVA shall
be admitted to any share or part of the Agreement or to any benefit that
may arise therefrom unless the Agreement be made with a corporation for its
general benefit, nor shall CCC offer or give, directly or indirectly, to
any officer, employee, special Government employee, or agent of TVA any
gift, gratuity, favor, entertainment, loan, or any other thing of monetary
value, except as provided in 18 C.F.R. (S) 1300.735-12 or -34. Breach of
this provision shall constitute a material breach of the Agreement.
13.7 Notwithstanding the provisions of Section 12.1, if CCC employs
any laborers or mechanics upon a TVA site in the construction, alteration,
maintenance, or repair of the System or the TVA System, CCC agrees to pay
such laborers and mechanics not less than the rate of wages for work of a
similar nature prevailing in the vicinity.
13.8 Notwithstanding the provisions of Section 12.1, CCC agrees during
the performance of its obligations under this Agreement to comply with the
equal employment opportunity and affirmative action requirements set forth
in 41 C.F.R. pts. 60-1 and 60-2 (equal employment opportunity), 41 C.F.R.
pt. 60-250 (disabled veterans and veterans of the Vietnam era), and 41
C.F.R. pt. 60-741 (handicapped workers), which requirements are
incorporated by reference and made a part hereof as if fully set forth
herein.
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<PAGE>
13.9 Payments due under this Agreement shall be made so as to be
received no later than the date for payment specified herein, and in the event
no date is otherwise specified within thirty (30) days of the date of invoice.
Each party hereto agrees to pay the other interest, at the rate payable by TVA
under the Prompt Payment Act (Pub. L. No. 97-177), including any amendments
thereto, on any overdue amount. Interest shall run from the date payment is due
until the date payment is received or the date the remittance is postmarked,
whichever is earlier. Payment of interest shall be due thirty (30) days after
an invoice for such interest is dated.
13.10 Should either CCC or TVA dispute any invoice presented by one
party to the other pursuant to any of the provisions of this Agreement with
respect to such invoices, and unless specifically provided for otherwise herein,
the party having such dispute shall remit to the other party any amount(s) not
disputed in accordance with the applicable provisions concerning said invoice;
concurrently, the party having dispute with any amount invoiced will present its
objections in writing, in sufficient detail to facilitate a prompt review
thereof, to the invoicing party. If after a prompt, careful, and prudent review
of the particulars of such disputed amounts the invoicing party finds in favor
of the party having raised such objections thereto, the invoicing party will
then present a revised invoice to the other, such revised invoice to be prepared
and presented in accordance with the provisions (including those relating as to
when such invoice is due and payable) applicable to the original disputed
invoice. If the original disputed invoice is mutually agreed to be just and
correct, the party having raised dispute to such invoice will immediately remit
to the invoicing party the entire disputed amount; in addition, the party having
raised such dispute and withheld payment therefor shall pay to the invoicing
party interest, applied to the unpaid amount, as set forth in Section 13.9
above, based on the date of the original disputed invoice.
13.11 Notwithstanding anything contained in this Agreement to the
contrary, if TVA reasonably determines that any of CCC's System, or any of CCC's
activities permitted hereunder, cause a material, adverse effect on TVA's power
system, CCC shall, upon notice from TVA, take all actions necessary to
immediately eliminate or alleviate such adverse effect at CCC's sole expense.
Any other adverse effect caused by CCC shall be corrected by CCC as soon as
reasonably practicable.
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TENNESSEE VALLEY AUTHORITY
By: [SIGNATURE ILLEGIBLE]
------------------------------------------
Senior Vice President of Power
------------------------------------------
Title
March 6, 1990
------------------------------------------
Date
CONSOLIDATED COMMUNICATIONS CORPORATION
By: /s/ Sid McDonald
------------------------------------------
President
------------------------------------------
February 14, 1990
------------------------------------------
Date
-20-
<PAGE>
Exhibit 10.33
INTERCONNECTION AGREEMENT
BETWEEN DELTACOM, INC. AND BELLSOUTH
TELECOMMUNICATIONS, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C>
I. RECITALS AND PRINCIPLES................................................ 1
-----------------------
II. SCOPE OF THE AGREEMENT................................................. 2
----------------------
III. DEFINITIONS............................................................ 2
-----------
IV. ACCESS TO UNBUNDLED NETWORK ELEMENTS................................... 2
------------------------------------
A. General Requirements............................................... 3
--------------------
B. Interconnection with Network Elements.............................. 3
-------------------------------------
C. Order Processing................................................... 6
----------------
D. Conversion of Exchange Service to Network Elements................. 8
--------------------------------------------------
E. Service Quality.................................................... 9
---------------
F. Network Information Exchange...................................... 10
----------------------------
G. Maintenance and Trouble Resolution................................ 10
----------------------------------
H. Billing for Network Elements...................................... 12
----------------------------
I. Addition of Network Elements...................................... 13
----------------------------
V. LOCAL TRAFFIC INTERCONNECTION ARRANGEMENTS............................ 13
------------------------------------------
A. Types of Local Traffic to Be Exchanged............................ 13
--------------------------------------
B. Designated Points of Interconnection.............................. 14
------------------------------------
C. Facilities for Local Interconnection.............................. 16
------------------------------------
D. Trunking and Signaling............................................ 17
----------------------
E. Network Management................................................ 21
------------------
F. Local Number Assignment........................................... 23
-----------------------
G. Cross-Connection to Other Collocators............................. 23
-------------------------------------
VI. LOCAL TRAFFIC EXCHANGE................................................ 24
----------------------
A. Exchange of Traffic............................................... 24
-------------------
B. Compensation...................................................... 24
------------
C. Transitted Traffic................................................ 24
------------------
VII. MEET-POINT BILLING ARRANGEMENTS....................................... 25
-------------------------------
A. Applicability of OBF Guidelines................................... 25
-------------------------------
B. Meet-Point Interconnection........................................ 26
--------------------------
C. Tariffs........................................................... 27
-------
D. Billing and Data Exchange......................................... 27
-------------------------
E. Toll Free IXC Traffic............................................. 29
---------------------
F. MPB Billing Percentages........................................... 29
-----------------------
G. Special Arrangements.............................................. 29
--------------------
VIII. TOLL TRAFFIC INTERCONNECTION.......................................... 30
----------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS (cont'd)
--------------------------
<S> <C>
IX. NUMBER RESOURCE ARRANGEMENTS.......................................... 31
----------------------------
X. ACCESS TO POLES, DUCTS, CONDUITS, AND RIGHTS OF WAY................... 33
--------------------------------------------------
XI. ANCILLARY SERVICES AND PLATFORM ARRANGEMENTS.......................... 34
---------------------------------------------
A. 8OO Traffic....................................................... 34
-----------
B. 911/E-911......................................................... 35
---------
C. Provision of Operator Services.................................... 37
------------------------------
D. Transfer of Service Announcements................................. 37
---------------------------------
E. Coordinated Repair Calls.......................................... 38
------------------------
F. Busy Line Verification and Interrupt.............................. 38
------------------------------------
F.1 Description................................................ 38
-----------
F.2 Compensation............................................... 39
------------
G. Directory Assistance (DA)......................................... 39
-------------------------
G.1 Description................................................ 39
-----------
G.2 Compensation............................................... 39
------------
H. Directory Listings and Directory Distribution..................... 39
---------------------------------------------
I. Access to Signaling and Signaling Databases....................... 40
-------------------------------------------
XII. TELEPHONE NUMBER PORTABILITY ARRANGEMENTS............................. 41
----------------------------------------
XIII. DISCONNECTION OF CUSTOMERS............................................ 45
--------------------------
XIV. RESALE OF BELLSOUTH LOCAL EXCHANGE SERVICES........................... 45
-------------------------------------------
XV. RESPONSIBILITIES OF THE PARTIES....................................... 46
-------------------------------
XVI. NETWORK DESIGN AND MANAGEMENT......................................... 47
-----------------------------
XVII. TERM.................................................................. 48
----
XVIII. IMPLEMENTATION OF AGREEMENT........................................... 50
---------------------------
XIX. UNIVERSAL SERVICE..................................................... 50
-----------------
XX. FORCE MAJEURE......................................................... 50
-------------
XXI. LIABILITY AND INDEMNIFICATION......................................... 50
-----------------------------
XXII. MOST FAVORABLE PROVISIONS............................................. 53
-------------------------
XXIII. DEFAULT............................................................... 56
-------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS (cont'd)
--------------------------
<S> <C>
XXIV. NONDISCLOSURE......................................................... 57
-------------
XXV. ARBITRATION........................................................... 58
-----------
XXVI. WAIVERS............................................................... 59
-------
XXVII. GOVERNING LAW......................................................... 59
-------------
XXVIII.ARM'S LENGTH NEGOTIATIONS............................................. 59
-------------------------
XXIX. NOTICES............................................................... 60
-------
XXX. ENTIRE AGREEMENT...................................................... 60
----------------
ATTACHMENT A (RESERVED FOR FUTURE USE)....................................... 61
ATTACHMENT B (Definitions).................................................... 1
ATTACHMENT C-1 (Collocation Rates)........................................... 15
ATTACHMENT C-2 (Unbundled Exchange Access Loops)............................. 20
ATTACHMENT C-3 (Loop Channelization)......................................... 23
ATTACHMENT C-4(Unbundled Exchange Ports)..................................... 24
ATTACHMENT C-5 (Signalling Rates)............................................ 27
ATTACHMENT C-6 (LIDB Storage)................................................ 28
ATTACHMENT C-7 (LIDB Validation).............................................. 7
ATTACHMENT C-8 (Directory Listings)........................................... 8
ATTACHMENT C-9 (911 Access)................................................... 9
ATTACHMENT C-10 (Operator Call Processing Access Service).................... 10
ATTACHMENT C-11 (Directory Assistance Access Service)........................ 11
ATTACHMENT C-12 (CMDS Hosting)............................................... 14
ATTACHMENT C-13 (Non-Sent Paid Report System).................................3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS (cont'd)
--------------------------
<S> <C>
ATTACHMENT D (SPNP-RCF Interim Rates)......................................... 4
ATTACHMENT E (SPNP-DID Interim Rates)......................................... 6
ATTACHMENT F (Blanket Agency Agreement)....................................... 8
</TABLE>
<PAGE>
INTERCONNECTION AGREEMENT
BETWEEN DELTACOM AND BELLSOUTH TELECOMMUNICATIONS
Pursuant to this Interconnection Agreement (Agreement), DeltaCom, Inc.
(collectively "DeltaCom"), and BellSouth Telecommunications, Inc. (collectively,
"BellSouth") (collectively, "the Parties") agree to extend certain
interconnection arrangements to one another within each LATA in which they both
operate. This Agreement is an integrated package that reflects a balancing of
interests critical to the Parties and is not inconsistent with Sections 251, 252
and 271 of the Telecommunications Act of 1996. The Agreement represents a
negotiated compromise and is entered without prejudice to any positions which
either party has taken, or may take in the future, before any legislative,
regulatory, judicial or other governmental body.
I. RECITALS AND PRINCIPLES
-----------------------
WHEREAS, BellSouth is an incumbent local exchange telecommunications
company (ILEC) authorized to provide telecommunications services in the states
of Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina,
South Carolina and Tennessee; and
WHEREAS, DeltaCom is a competitive local exchange telecommunications
company (CLEC) which is authorized or plans to become authorized to provide
local telecommunications services in Alabama, Florida, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, South Carolina and Tennessee; and
WHEREAS, the interconnection and interoperability of the Parties'
respective local networks is required to facilitate the introduction of local
exchange service competition and fulfill the objectives of the
Telecommunications Act of 1996 (Telecommunications Act); and
WHEREAS, universal connectivity and interoperability between competing
telecommunications carriers is necessary for the termination of traffic on each
carrier's network; and
WHEREAS, the Parties intend that BellSouth should unbundle certain basic
network elements and make them available for purchase by DeltaCom; and
WHEREAS, the Parties agree that this Agreement shall be filed with the
appropriate state commissions in compliance with Section 252 of the
Telecommunications Act;
1
<PAGE>
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, DeltaCom and BellSouth hereby covenant and agree
as follows:
II. SCOPE OF THE AGREEMENT
----------------------
This Agreement will govern the interconnection arrangements between the
Parties to facilitate the interconnection of their facilities and the connection
of local and interexchange traffic initially in the states of Alabama, Florida,
Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and
Tennessee. This agreement will further govern the unbundling of BellSouth
network elements in the same states.
III. DEFINITIONS
-----------
The definitions contained in Attachment B are intended to define and
govern how the technical terms included therein are used in this Agreement.
However, except as provided herein, the inclusion or exclusion of any particular
definition is not intended by either party to limit, or to define technical
interface, reliability, performance or throughput parameters for the network
elements that both Parties expect to interconnect and interoperate.
The minimum performance, reliability, throughput and operational
characteristic of elements identified herein, as well as physical and logical
interface standards utilized, unless otherwise specifically provided herein, are
according to generally accepted industry standards as defined by the ITU
(ISO/CCITT), ANSI, or the Network Management Forum, whichever is more specific.
Where standards are not yet fully defined, the Parties agree to take reasonable
steps to insure that interface designs are modularized and retrofittable to any
pending standard at the least cost to the interconnecting Parties.
IV. ACCESS TO UNBUNDLED NETWORK ELEMENTS
------------------------------------
BellSouth shall unbundle Network Elements used in the provision of a
telecommunications service and offer them for resale to DeltaCom as provided
hereafter. DeltaCom shall be entitled to request, and BellSouth shall provide,
access to any such unbundled Network Element(s). BellSouth shall unbundle and
separately price and offer those elements such that DeltaCom will be able to
lease and interconnect to whichever of these unbundled Network Elements DeltaCom
requires, and combine the BellSouth-provided Network Elements with any
facilities and services that DeltaCom may itself provide or obtain from other
telecommunications
2
<PAGE>
carriers, in order to offer telecommunications services to other
telecommunications carriers and end users. Such Network Elements shall be
offered as provided hereafter.
A. General Requirements
--------------------
A.1 The Parties hereto mutually understand and agree that the array of
Network Elements is steadily evolving and expanding. The initial
set of Network Elements and attendant services to be made
available by BellSouth hereunder is included as Attachment C
hereto. Network Elements will be provided subject to the rules,
terms and conditions expressed in this Article and in Attachment
C. It is understood, however, that either Party may add Network
elements to the listing contained in Attachment C as the BellSouth
network changes or additional Network Elements are identified. It
is especially acknowledged, without limitation, that the list of
Network Elements may be expanded by either Party to include
Network Elements identified in relevant FCC or state commission
regulations or orders, or made available by BellSouth to other
telecommunications carriers pursuant to other interconnection
agreements. The addition or inclusion of additional Network
Elements shall be made in accordance with subsection IV.I hereof.
A.2 Without limitation, BellSouth agrees to provide DeltaCom access to
all Network Elements identified in Attachment C hereto. Wherever
technically feasible, interconnection shall be offered at both the
line and trunk side of each discrete Network Element. It is agreed
that interconnection will be made available by BellSouth to
DeltaCom at any technically feasible point. BellSouth must
implement physical and logical interconnection points consistent
with generally accepted industry standards.
A.3 The initial pricing of the initial unbundled Network Elements
shall be as set forth in Attachment C, except that initial pricing
of unbundled loops, switch ports and other network elements will
be established through state commission arbitration as provided in
Article XXV hereof and Attachment C hereto. The initial pricing
may be revised by mutual agreement or at DeltaCom's election
pursuant to Article XXII hereof.
A.4 It is agreed that DeltaCom may combine network elements purchased
hereunder as required to provide any local, toll or access
service. If DeltaCom recombines network elements to mirror
existing retail service, as defined by the applicable state
commission, the resale rate shall apply.
3
<PAGE>
B. Interconnection with Network Elements
-------------------------------------
B.1 Interconnection shall be achieved via collocation arrangements DeltaCom
shall maintain at a BellSouth wire center or other BellSouth network
point.
B.2 At DeltaCom's discretion, each unbundled loop or port element shall be
delivered to the DeltaCom collocation arrangement over an individual 2-
wire hand-off, in multiples of 24 over a digital DS-1 hand-off in any
combination or order DeltaCom may specify, in multiples of 672 over a
digital DS-3 hand-off in any combination or order DeltaCom may specify,
or through other technically feasible and economically comparable hand-
off arrangements requested by DeltaCom (e.g., SONET STS-1 hand-off).
Economically comparable as used in this section refers to an
economically comparable effect upon DeltaCom and is not meant to ensure
an equivalent revenue stream or contribution level to BellSouth.
B.3 BellSouth will permit DeltaCom to collocate DLC systems in conjunction
with collocation arrangements DeltaCom maintains at a BellSouth wire
center, for the purpose of interconnecting to unbundled loop elements.
DeltaCom will have the option of purchasing BellSouth unbundled
transport (at any transmission level) between placed equipment and the
DeltaCom network.
B.4 DeltaCom shall access BellSouth's unbundled loops via collocation at
the BellSouth wire center where those elements exist. Each loop or port
shall be delivered to DeltaCom's collocation by means of a cross
connection.
B.5 BellSouth shall provide DeltaCom access to its unbundled loops at each
of BellSouth's Wire Centers. In addition, if DeltaCom requests one or
more loops serviced by Integrated Digital Loop Carrier or Remote
Switching technology deployed as a loop concentrator, BellSouth shall,
where available, move the requested loop(s) to a spare, existing
physical loop at no charge to DeltaCom. If, however, no spare physical
loop is available, BellSouth shall within seventy-two (72) hours of
DeltaCom's request notify DeltaCom of the lack of available facilities.
DeltaCom may then, at its discretion, make a network element request
for BellSouth to provide the unbundled loop through the demultiplexing
of the integrated digitized
4
<PAGE>
loop(s). Special constructions may apply in this situation. DeltaCom
may also make a network element request for access to unbundled loops
at the loop concentration site point. Attachment D hereto shall not
apply to unbundled loops provided pursuant to this subsection.
B.6 Where BellSouth utilizes digital loop carrier (DLC) technology to
provision the loop element of an unbundled exchange service to an end
user customer who subsequently determines to assign the loop element to
DeltaCom and receive Exchange Service from DeltaCom via such loop,
BellSouth shall deliver such loop to DeltaCom on an unintegrated basis,
pursuant to DeltaCom's chosen hand-off architecture, without a
degradation of end user service or feature availability as supported by
DeltaCom's chosen hand-off architecture.
B.7 Except as otherwise specified herein, all dedicated transport-based
features, functions, service attributes, grades-of-service, install,
maintenance, and repair intervals which apply to BellSouth's bundled
local exchange service shall apply to unbundled loops.
B.8 Except as otherwise specified herein, all switch-based features,
functions, service attributes, grades-of-service, and install,
maintenance, and repair intervals which apply to BellSouth's bundled
local exchange service shall apply to unbundled ports.
B.9 BellSouth will permit any customer to convert its bundled local service
to an unbundled element or service and assign such unbundled element or
service to DeltaCom with no penalties, rollover, termination or
conversion charges to DeltaCom or the customer, except as speciffically
provided in Attachment C-2 hereto or pursuant to the terms of a
specific customer service agreement, if BellSouth waives like charges
and penalties for any other telecommunications carrier (unless
superceded by government action).
B.10 BellSouth will permit DeltaCom to collocate remote switching modules
and associated equipment in conjunction with collocation arrangements
DeltaCom maintains at a BellSouth wire center, for the purpose of
interconnecting to unbundled loop or link elements.
B.11 When available to any other telecommunications carrier or other
customer, BellSouth shall provide DeltaCom with an appropriate on-line
electronic file transfer arrangement by which DeltaCom may place,
verify, and receive
5
<PAGE>
confirmation on orders for unbundled elements, and issue and track
trouble-ticket and repair requests associated with unbundled elements.
In the interim, batch file arrangements specified in BellSouth's
current Facilities Based Carrier Operating Guide (FBOG) shall apply.
EXACT electronic interface is the preferred method by which to order
unbundled elements. BellSouth shall provide DeltaCom with the ability
to order any defined network element using OBF or other mutually agreed
upon ordering/provisioning codes.
B.12 It is expressly agreed that interconnection will be afforded equally
regardless of the transmission medium selected by the interconnector,
i.e., digital or analog loops, conditioned circuits, ISDN, SONET, etc.,
so that networks and applications can evolve unencumbered by the
available degree of interconnectivity when such elements are available.
B.13 Wherever technically possible, it is expressly agreed and understood
that BellSouth will provide interconnection on both the line side and
trunk side of each unbundled Network Element. Where interconnection is
ordered to the line side of a Network Element, interconnection shall be
on a hard-wired (not software driven) basis.
B.14 The Parties shall attempt in good faith to mutually devise and
implement a means to extend the unbundled loop sufficient to enable
DeltaCom to use a collocation arrangement at one BellSouth location per
LATA (e.g., tandem switch) to obtain access to the unbundled loop(s) at
another such BellSouth location over BellSouth facilities.
B.15.BellSouth shall develop a process to identify the carrier for each
unbundled loop and establish automated intercompany referral and/or
call hand-off processes for an additional charge. In addition,
BellSouth will not in any way hinder DeltaCom from deploying modern DLC
equipment (TR303) throughout DeltaCom's portion of the unbundled
loop/transport network.
C. Order Processing
----------------
C.1 DeltaCom shall place orders for unbundled loops (and other network
elements) through completion and submission of a service request
specified in the FBOG.
C.2 Order processing for unbundled loops will be fully mechanized.
6
<PAGE>
C.3 Particular combinations of elements, hereafter referred to as
combinations, identified and described by DeltaCom can be ordered and
provisioned as combinations, and not require the enumeration of each
element within that combination in each provisioning order, consistent
with OBF or other mutually agreed upon procedures.
C.4 Appropriate ordering/provisioning codes will be established for each
identified combination, consistent with OBF or other mutually agreed
upon procedures.
C.5 When combinations are ordered where the elements are currently
interconnected and functional, those elements will remain
interconnected and functional (except for the integrated SLC).
C.6 When available, BellSouth will provide DeltaCom with the ability to
have the BellSouth end office AIN triggers initiated via a service
order from DeltaCom.
C.7 DeltaCom and BellSouth will negotiate in good faith to create a
mutually acceptable standard service order/disconnect order format,
consistent with OBF or other mutually agreed upon procedures.
C.8 BellSouth shall exercise best efforts to provide DeltaCom with the
"real time" ability to schedule installation appointments with the
customer on-line and access to BellSouth's schedule availability
beginning in the second calendar quarter of 1997. In the interim,
BellSouth will make best effort to install unbundled loops and other
network elements by the Customer Desired Due Date (CDDD) where
facilities permit. Service requests wiith shorter intervals than normal
interals or those that require out-of-hours provisioning may be
subject to additional charges.
7
<PAGE>
C.9 When available to any other telecommunications carrier or other
customer, BellSouth shall provide "real time" response for firm order
confirmation, due date availability/scheduling, dispatch required or
not, identify line option availability by Local Service Office (LSO)
(such as digital copper, copper analog, ISDN), completion with all
service order and time and cost related fees, rejections/errors on
service order data element(s), jeopardies against the due date, missed
appointments, additional order charges (construction charges), order
status, validate street address detail, and electronic notification of
the local line options that were provisioned. This applies to all types
of service orders and all network elements.
C.10 BellSouth will provide to DeltaCom escalation procedures for ordering
and provisioning. If an expedite is requested by DeltaCom on the
customer's behalf, normal expedite charges shall apply.
D. Conversion of Exchange Service to Network Elements
--------------------------------------------------
D.1 Installation intervals for service established via Unbundled loops will
be handled in the same timeframe as BellSouth provides services to its
own customers, as measured from date of customer order to date of
customer delivery. BellSouth will make best effort to install unbundled
loops and other network elements by the Customer Desired Due Date
(CDDD) where facilities permit. Service requests with a shorter than
standard interval or those that require out-of-hours provisioning may
be subject to additional charges.
D.2 On each unbundled network element order in a wire center, DeltaCom and
BellSouth will agree on a cutover time at least 48 hours before that
cutover time. The cutover time will be defined as a 180 minutes window
within which both the DeltaCom and BellSouth personnel will make
telephone contact to complete the cutover.
D.3 Within the appointed 180 minutes cutover time, the DeltaCom contact will
call the BellSouth contact designated to perform cross-connection work
and when the BellSouth contact is reached in that interval, such work
will be promptly performed.
8
<PAGE>
D.4 If the DeltaCom contact fails to call or is not ready within the
appointed interval and if DeltaCom has not called to reschedule the
work at least eight (8) hours prior to the start of the interval,
BellSouth and DeltaCom will reschedule the work order.
D.5 If the BellSouth contact is not available or not ready at any time
during the 60 minute interval, DeltaCom and BellSouth will reschedule
D.6 The standard time expected from disconnection of a live Exchange
Service to the connection of the unbundled element to the DeltaCom
collocation arrangement is 15 minutes
D.7 If unusual or unexpected circumstances prolong or extend the time
required to accomplish the coordinated cut-over, the Party responsible
for such circumstances is responsible for the reasonable labor charges
of the other Party. Delays caused by the customer are the
responsibility of DeltaCom.
D.8 If DeltaCom has ordered Service Provider Number Portability (SPNP) as
part of an unbundled loop installation, BellSouth will coordinate
implementation of SPNP with the loop installation.
D.9 If BellSouth provides in practice shorter scheduling lead times and/or
cutover windows than those specified in this section for the same
services for other carrier, it will do the same for DeltaCom.
E. Service Quality
---------------
E.1 At a minimum, the service quality of leased network elements should
match that of BellSouth's own elements and conform to all Bellcore and
ANSI requirements applicable to the type of service being provided. In
addition, BellSouth will provide maintenance services on network
elements purchased by DeltaCom which are timely, consistent and at
parity with that provided when such elements are used for its own
purposes.
E.2 Maintenance support shall be available 7 days a week, 24 hours a day.
Provisioning support shall be available at the same times at which
BellSouth installs its own bundled local exchange services.
E.3 Installation and service intervals shall be the same as when BellSouth
provisions such network elements for use by itself, its affiliates or
its own retail customers.
9
<PAGE>
E.4 In facility and power outage situations, BellSouth agrees to provide
network elements leased by DeltaCom the same priority for maintenance
and restoral as similar elements used by BellSouth for itself or its
affiliates.
E.5 The Parties agree that all interconnection arrangements and services
will at a minimum be subject to technical standards which are equal to
those that BellSouth affords to itself, any other LEC or other
telecommunications carrier. This must, at a minimum, include parity in:
. Port features
. Treatment during overflow/congestion conditions
. Equipment/interface protection
. Power redundancy
. Sufficient spare facilities to ensure provisioning, repair,
performance and availability
. Mediation functions
. Standard interfaces
F. Network Information Exchange
----------------------------
F.1 BellSouth shall provide DeltaCom with information sufficient to
determine an end user's existing service and feature configurations.
F.2 BellSouth shall provide information to DeltaCom on a continuing basis
required to keep DeltaCom apprised of engineering changes associated
with BellSouth's network elements and its deployment of new
technologies.
F.3 BellSouth shall provide DeltaCom with a detailed description of the
criteria and procedures used for handling facility and power outages.
F.4 Where permitted by law, BellSouth will provide DeltaCom with electronic
(magnetic tape and/or diskette) and hard copies of its Master Street
Address Guide (MSAG), and any regular updates thereof.
F.5 BellSouth will provide DeltaCom with access to a listing and
description of all services and features available down to street
address detail, including: Type of Class 5 switch by CLLI, line
features availability by LSO, and
10
<PAGE>
service availability by LSO, as well as the data elements required by
BellSouth to provision all such services and features.
G. Maintenance and Trouble Resolution
----------------------------------
G.1 Where available to other telecommunication service providers,
Automated interfaces shall be provided into a centralized operations
support systems database for real time network monitoring to
proactively identify potential service degradation. Such systems must
monitor and report on the integrity of the BellSouth network, isolate
troubles and initiate repair operations, test individual unbundled
loops and generate maintenance and repair notices that impact any end
user's ability to complete calls. Ongoing maintenance practices on
unbundled loops shall equal the practices employed by BellSouth for
facilities used to provide retail services. BellSouth will use its best
efforts to ensure that the mean time to repair unbundled loops shall be
equivalent to the mean time to repair reported by BellSouth for its
retail customers.
G.2 Service centers shall be established by both Parties to handle service
issues, escalations, resolution of billing issues and other
administrative problems.
G.3 The Parties agree to establish a real time automated industry standard
electronic interface (EBI) to perform the following functions:
. Trouble Entry
. Obtain Trouble Report Status
. Obtain Estimated Time To Repair (ETTR) and ILEC Ticket Number
. Trouble Escalation
G.4 The Parties agree to adopt a process for the efficient management of
misdirected service calls.
G.5 BellSouth will provide DeltaCom with numbers for the appropriate repair
center until such time as a center is established to act as DeltaCom's
single point of contact for all maintenance functions which will
operate on a 24 hour a day, 7 days a week basis.
G.6 BellSouth will be responsible for all reported trouble and will perform
required test and/or maintenance until such trouble report is turned
back to DeltaCom.
11
<PAGE>
G.7 BellSouth's established maintenance escalation policy shall apply in
resolving maintenance trouble.
G.8 BellSouth shall perform Mechanized Loop Tests (Quick Test) at the
request of DeltaCom while DeltaCom is on line.
G.9 BellSouth shall provide progress status reports sufficient to enable
DeltaCom to provide end user customers with detailed information and an
estimated time to repair (ETTR).
G.10 BellSouth will close all trouble reports with DeltaCom. DeltaCom will
close all trouble reports with the end user.
G.11 BellSouth will not undertake any work at an end user's request for
which DeltaCom would be charged without obtaining the prior approval of
DeltaCom. This includes authorizations by DeltaCom if a dispatch is
required to the customer premises as well as verification of actual
work completed. DeltaCom will coordinate dispatches to the customer
premises. This includes dispatches for customer not-at-home.
G.12 All Auto/Subscriber Line Tests (ALIT/SLIT) tests performed on DeltaCom
customers that result in a failure will be reported to DeltaCom.
G.13 BellSouth will ensure that all applicable alarm systems that support
DeltaCom customers are operational and the supporting databases are
accurate so that equipment that is in alarm will be properly
identified. BellSouth will respond to DeltaCom customer alarms
consistent with how and when they respond to alarms for their own
customers.
G.14 Nondiscriminatory emergency restoration and disaster recovery plans
will be developed consistent with TSR essential line procedures. The
plans should outline methods for the restoration of each central office
in the local network provider territory as well as contain site
specific restoration alternatives which can be implemented based on the
magnitude of the disaster. Each plan should incorporate at a minimum
the following elements:
a. A BellSouth single point of contact which shall be:
- Responsible for notification of the DeltaCom work center
- Responsible for the initiation of BellSouth's restoration plan
- Responsible for status and problem resolution during the entire
restoration process
12
<PAGE>
b. A restoration equipment dispatch plan which will establish a:
- Documented procedure on how equipment will be dispatched to the
restoration site
- Estimated maximum time for the restoration equipment to arrive on
site
c. Prior notification of any scheduled maintenance activity performed by
the local supplier that may be service affecting to DeltaCom local
customers (i.e., cable throws, power tests, etc.).
H. Billing for Network Elements
----------------------------
H.1 BellSouth will bill all unbundled elements and associated services
purchased by DeltaCom (either directly or by previous assignment by a
customer) on no more than two (2) consolidated statements per Point of
Interconnection (POI) with sufficient billing detail to enable DeltaCom
to reasonably audit such charges.
H.2 Invoices must be presented monthly in a Carrier Access Billing Systems
(CABS) and/or Customer Record Information System (CRIS) format in order
to facilitate standard industry auditing practices. DeltaCom and
BellSouth will agree on the flow and format of CARE records for correct
provisioning and billing to IXCs.
I. Addition of Network Elements
----------------------------
DeltaCom may request that BellSouth allow purchase and interconnection of
additional Network Elements at any time by making a demand in writing
including a proposed revised Attachment C. BellSouth will respond in writing
within thirty (30) days of receipt of such a request, and either accept or
reject the service request. BellSouth may not refuse to make the requested
Network Element available if its availability is required by FCC or state
commission requirements, the Network Element is provided to any other
telecommunications carrier, or interconnection is technically feasible and
failure to obtain access to such Network Element might impair the ability of
DeltaCom to provide telecommunications services. Pricing of such additional
elements shall be provided within forty-five (45) days of receipt of the
request for service, and shall be in accordance with the requirements of 47
U.S.C. (S)252(d)(1). Actual interconnection and provision of service shall
be provided within ninety (90) days of receipt of the service request.
13
<PAGE>
V. LOCAL TRAFFIC INTERCONNECTION ARRANGEMENTS
------------------------------------------
A. Types of Local Traffic to Be Exchanged
--------------------------------------
The Parties agree to provide the necessary facilities and equipment to
allow for the exchange of the following types of traffic between
BellSouth and DeltaCom:
A.1 Local Exchange: Local traffic to be terminated on each party's
local network so that customers of either party have the ability
to reach customers of the other party without the use of access
codes.
A.2 Exchange Access: The offering of access to telephone exchange
services or facilities-based origination and termination of
intraLATA or interLATA toll services.
A.3 IXC Transit: BellSouth shall provide intermediary network access
service between DeltaCom and any IXC for the purpose of completing
interLATA or intraLATA toll traffic.
A.4 Other Transit Functions: BellSouth shall provide intermediary
tandem switching and transport services for DeltaCom's connection
of its end user to a local end user of other CLECs, other ILECs,
and wireless telecommunications providers.
A.5 Intelligent Network and Network Surveillance: BellSouth shall
provide open logical interconnection points to AIN/IN interface in
their network based on the agreements reached at the IILC Issue
026. BellSouth must also provide access to monitoring,
surveillance and other fraud control functions in its network.
A.6 Other Services: BellSouth shall provide connection and call
routing for 911, directory assistance, and operator assistance
services.
B. Designated Points of Interconnection
------------------------------------
The Parties shall designate Points of Interconnection (POIs) on each
other's networks. DeltaCom shall at a minimum designate a POI at each
BellSouth access tandem serving the local calling area of the exchanges
being served by DeltaCom. DeltaCom may designate additional POIs within
a BellSouth local calling area and BellSouth will not unreasonably
refuse to interconnect at each such designated POI.
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<PAGE>
BellSouth may designate a POI at one or more of DeltaCom's local switching
centers within each LATA in which DeltaCom is providing local service. If no
DeltaCom local switching center is located within such LATA, the Parties will
arrange a POI at a mutually agreed point within such LATA. DeltaCom will not
unreasonably refuse to interconnect at a POI designated by BellSouth.
B.1 Interconnection will be available at any technically feasible point that is
used in the transmission of voice, data or other types of traffic.
B.2 Reciprocal connectivity shall be established at each and every BellSouth
access tandem within the local calling area DeltaCom desires to serve for
interconnection to those end offices that subtend the access tandem. At its
discretion, DeltaCom may elect to interconnect directly at any BellSouth
end offices for interconnection to end users served by that end office.
Such interconnecting facilities shall conform, at a minimum, to the
telecommunications industry standard of DS-1 pursuant to Bellcore Standard
No. TR-NWT-00499. Signal transfer point, Signaling System 7 (SS7)
connectivity is required at each interconnection point where available.
BellSouth will provide out-of-band signaling using Common Channel Signaling
Access Capability where technically and economically feasible, in
accordance with the technical specifications set forth in the BellSouth
Guidelines to Technical Publication, TR-TSV-000905. The Parties agree that
their facilities shall provide the necessary on-hook, off-hook answer and
disconnect supervision, and shall hand off calling party number ID where
technically feasible.
B.3 In accordance with Section V.C hereafter, collocation arrangements will be
established which are suitable for use in DeltaCom/BellSouth local
interconnection and DeltaCom access to unbundled BellSouth network
components. Allowable collocation equipment includes transmission and
concentrating equipment.
B.4 In accordance with Section V.D hereafter, the Parties agree to establish
trunk groups such that each Party provides a reciprocal of each trunk group
established by the other Party. The Parties agree to install efficient and
sufficient facilities to carry traffic (1) to route calls originating on
its network and terminating on the other carrier's network to its POI, and
(2) to route calls originating on the other local exchange carrier's
network, but terminating on its network from that carrier's POI, and will
work cooperatively to ensure such. Notwithstanding the foregoing, each
Party
15
<PAGE>
may construct its network, including the interconnecting
facilities, to achieve optimum cost effectiveness and network
efficiency.
B.5 Each Party shall be responsible for routing calls to the POI for
termination via the other's facilities. Each Party shall bear its
own costs related to installation at the POI. DeltaCom may
establish POIs on the BellSouth network via a negotiated expanded
interconnection arrangement or via leased transport between the
DeltaCom network and the BellSouth access tandem. BellSouth may
establish POIs on the DeltaCom network via an expanded
interconnection arrangement at the DeltaCom local switching center
or via leased transport between an DeltaCom expanded interconnect
arrangement and an DeltaCom local switching center.
B.6 Either Party may use the POI for the interconnection of other types
of services, such as toll services, subject to the applicable rates
for such interconnection.
B.7 BellSouth may not impose any restrictions on traffic types
delivered to or from the POI(s). Notwithstanding the foregoing, the
Parties hereto agree that no interexchange access services traffic
will be exchanged as local traffic hereunder.
B.8 Once traffic is delivered to the POI, it is the terminating
carrier's responsibility to terminate the traffic to its end users.
Calls should be terminated using the same network, ensuring the
same quality of service, as the carrier provides its own customers.
B.9 Except as specifically provided for in Attachment C-1 hereto
neither Party will charge the other reconfiguration charges for new
installations at existing POIs.
B.10 BellSouth will absorb any applicable nonrecurring charges incurred
by DeltaCom as a result of network redesigns/reconfigurations
initiated by BellSouth to its own network.
C. Facilities for Local Interconnection
------------------------------------
C.1 The parties agree there are four appropriate methods of
interconnecting facilities: (1) virtual collocation where physical
collocation is not practical for technical reasons, because of
space limitations or at the option of the Party requesting
interconnection; (2) physical collocation;
16
<PAGE>
(3) interconnection via purchase of facilities from either party by
the other party; and (4) mid fiber meet. Rates and charges for
collocation are set forth in Attachment C-1 hereto and applicable
provisions of BellSouth's access service tariffs.
C.2 Each Party hereto at its election shall have the sole right and
discretion to specify any one of the following methods for
interconnection at the POI:
a. a mid-fiber meet in a manhole or other appropriate junction point
inside, near to, or just outside the wire center designated as the
POI, in which case the Party requesting interconnection shall
additionally have the sole right and discretion to effect such meet
by leasing from a third party, fiber facilities into the POI mid-
fiber meet junction point (i.e., virtual collocation);
b. a collocation facility which it maintains at the other Party's POI
wire center (i.e., physical collocation);
c. a collocation facility maintained at the POI wire center by a third
party with whom the Party requesting interconnection has contracted
for such purpose; or
d. a digital transport facility(ies) leased from the other Party
hereto under the most favorable contract or tariff terms offered,
where such facility(ies) extends to the POI from some second point
designated by the Party requesting interconnection.
The Party requesting interconnection may, upon 60 days' advance written
notice to the other Party, change from one of the interconnection
methods specified above to another of the networks specified above. A
mutually acceptable third party contractor can be employed by the Party
making the change to implement such changes, in which case no
conversion or rollover charges will be assessed by the other party.
C.3 Existing DeltaCom special access collocation arrangements with
BellSouth shall be available for use by DeltaCom in the provision
of switched services hereunder at no additional charge to DeltaCom.
C.4 DeltaCom may at its option replace current virtual collocation
arrangements at any location with physical collocation
arrangements. The Parties agree that no termination penalties or
liabilities will apply to the termination of existing virtual
collocation arrangements. A mutually acceptable third party
17
<PAGE>
contractor can be employed by the Party making the change to
implement such a replacement, in which case no conversion,
installation or non-recurring charges will be assessed by the other
Party.
D. Trunking and Signaling
----------------------
D.1 a. The Party receiving traffic for termination can elect to receive
the traffic in one of two ways: (a) over separate trunks for local
and non-local; or (b) on combined trunks; provided that separate
trunk groups shall be utilized where the delivering party is
unable to furnish an auditable percent local usage (PLU) factor to
the party receiving the traffic on a quarterly basis.
b. If direct end office trunking with combined trunks is used, the
Parties will work cooperatively to develop a procedure for
accurately determining the amount of interLATA access traffic for
proper application of switched access charges.
D.2 Trunking shall be available to any switching center designated by
either carrier: including end offices, access tandems, 911 routing
switches, directory assistance/operator services switches, or any
other feasible point in the network. The Parties shall have the
option for either one-way or two-way trunking. Directionality in
this case refers to the traffic flowing between two networks, not
to the logical or physical configuration of the trunk. All trunks
should be configured two way for testing purposes.
D.3 Trunking can be established to tandems or end offices or a
combination as mutually agreed. Normally, trunking will be at the
DS-1 level. On a trunk group specific basis, the Parties may agree
to establish trunking at higher (e.g., DS-3) levels. Initial
trunking will be established between the DeltaCom local switching
centers and the BellSouth access tandems. The Parties will utilize
direct end office trunking under the following conditions:
a. BellSouth tandem exhaust - If a BellSouth access tandem to which
DeltaCom is interconnected is unable to, or is forecasted to be
unable to, support additional traffic loads for any period of time,
the Parties will mutually agree on an end office trunking plan that
will alleviate the tandem capacity shortage and ensure completion
of traffic between DeltaCom and BellSouth subscribers.
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<PAGE>
b. Traffic volumes - The Parties shall install and retain direct end
office trunking sufficient to handle actual or reasonably forecast
traffic volumes, whichever is greater, between an DeltaCom local
switching center and a BellSouth and office where traffic between
such points exceeds or is forecast to exceed 125,000 minutes of
local traffic per month. The Parties will install additional
capacity between such points when overflow traffic between the
DeltaCom switching center and BellSouth access tandem exceeds or is
forecast to exceed 125,000 minutes of local traffic per month.
c. Mutual agreement - The Parties may install direct end office
trunking upon mutual agreement in the absence of conditions (a) or
(b) above and agreement will not unreasonably be withheld.
D.4 The Parties will provide Common Channel Signaling (CCS) information
to one another, where and as available, at no charge, in
conjunction with all POI trunk groups. The Parties will cooperate
in the exchange of Transaction Capabilities Application Part (TCAP)
messages to facilitate full inter-operability of CCS-based features
between their respective networks, including all CLASS features and
functions, to the extent each carrier offers such features and
functions to its own end users. All CCS signaling parameters will
be provided including calling party number (CPN), originating line
information (OLI) calling party category, charge number, etc. All
privacy indicators will be honored. Where available, network
signaling information such as Carrier Identification Parameter (CCS
platform), at the standard tariff rates, and CIC/OZZ information
(non-CCS environment) will be provided wherever such information is
needed for call routing or billing. The Parties will follow all
Ordering and Billing Forum (OBF) adopted standards pertaining to
CIC/OZZ codes. Where CCS is not available, in-band multi-frequency
(MF) wink start E&M channel associated signaling will be provided.
Such MF arrangements will require a separate trunk group between
DeltaCom's switch and one specified BellSouth switch.
D.5 DeltaCom shall establish CCS interconnection with BellSouth signal
transfer points (STPs) in each LATA, either directly or via an
intermediary STP provider. Where the interconnection is via B-link
connections, charges for the SS7 interconnection elements are as
follows: 1) Port Charge- BellSouth will not bill an STP port charge
nor will BellSouth agree to pay a port charge; 2) SS7 Network
Usage- BellSouth will bill SS7 Network Usage and will agree to pay
usage billed by DeltaCom (to the extent that a flat rate surrogate
charge is billed by DeltaCom, it will not exceed BellSouth's
19
<PAGE>
charge); 3) SS7 Link- BellSouth will bill for only two Links of
each quad ordered. Application of these charges in this manner
reflects the reciprocal use of the two parties signaling networks.
Where the interconnection is via A-link connections, charges for
the SS7 interconnection elements are as follows: 1) Port Charge-
BellSouth will bill an STP port charge and does not agree to pay a
termination charge at DeltaCom's end office; 2) SS7 Network Usage-
BellSouth will bill for usage on its SS7 network and will not agree
to pay for any usage billed by DeltaCom; 3) Link- BellSouth will
bill full charges for each link in the A-link pair and will not
agree to pay DeltaCom for any portion of those links.
D.6 DeltaCom may opt at any time to terminate to BellSouth some or all
local exchange traffic and intraLATA toll traffic originating on
its network, together with switched access traffic, via Feature
Group A, B, C or D Switched Access services which DeltaCom may
otherwise purchase from BellSouth, subject to the rates, terms and
conditions specified in BellSouth's applicable switched access
tariffs. At no time shall DeltaCom be required to route outbound
traffic via facilities for which a full retail or end user toll
charge would be assessed when parallel FG-A, FG-B, FG-C, or FG-D
routing, or routing via a different carrier exists which is capable
of carrying and completing said traffic at more favorable rates.
D.7 The Parties will cooperate to jointly plan for the deployment of
intercompany 64 Kbps per second clear channel capability.
D.8 Service arrangements hereunder shall be engineered to an objective,
consistent P.01 or better grade of service at the peak busy hour.
D.9 The Parties shall periodically exchange technical descriptions and
trunk/traffic forecasts of their interconnection and traffic
requirements in sufficient detail to assure traffic completion to
and from all customers within the appropriate calling areas.
D.10 BellSouth shall deliver intraLATA traffic originating from its
subscribers and terminating to DeltaCom's subscribers via a
combined two-way trunk group using facilities leased from DeltaCom
on mutually agreeable terms.
D.11 BellSouth will provide interconnection to and from intelligent
network, signaling, monitoring, surveillance and fraud control
points.
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<PAGE>
D.12 BellSouth shall provide and implement all industry standard SS7
parameters as well as procedures that are defined in the ANSI
standards, even if today's services do not specifically require
these features. These functions shall include:
a. All functions of the ISUP, TCAP, SCCP, and MTP as specified in
relevant BellCore specifications.
b. All functions of the OMAP, including MTP Routing Verification Test
(MRVT) and SCCP Routing Verification Test (SRVT).
D.13 The Parties shall meet or exceed SS7 performance objectives as
described in Bellcore TR-905 section 7, and MTP and SCCP
performance as specified by ANSI.
D.14 Either Party shall have the option for Multi-Frequency (MF)
signaling, but only when either party does not have the technical
capability to provide SS7 facilities.
D.15 Other Signaling Requirements:
a. CIP shall be provided (CIC within the SS7 call set-up signaling
protocol) at tariffed charges.
b. All mandatory SS7 signaling parameters must be provided including
Calling Party Number (CPN). All privacy indicators must be honored.
E. Network Management
------------------
E.1 The Parties agree to work cooperatively to install and maintain
reliable interconnected telecommunications networks, including but
not limited to, the exchange of appropriate information concerning
network changes that affect services to the other Party,
maintenance contact numbers and escalation procedures.
E.2 The interconnection of all networks will be based upon accepted
industry/national guidelines for transmission standards and traffic
blocking criteria.
21
<PAGE>
E.3 The Parties will work cooperatively to apply sound network
management principles by invoking appropriate network management
controls (e.g., call gapping) to alleviate or prevent network
congestion.
E.4 The Parties will cooperate to determine the performance of their
respective networks and will implement joint management controls to
further overall service integrity.
E.5 The Parties will jointly develop and agree on a Joint
Interconnection Grooming Plan prescribing standards to ensure that
traffic exchanged over the POI trunk groups experiences a
consistent P.01 or better grade of service peak busy hour, and
other appropriate, relevant industry-accepted quality, reliability
and availabilty standards. Such plan shall also include mutually
agreed upon standards for the configuration of segregated POI trunk
groups. In addition, the plan shall also include standards and
procedures for notification of trunk disconnections and
discoveries of trunk disconnections. Neither Party shall be
expected to maintain active status for a trunk disconnected by the
other Party for an extended or indefinite period of time. The
Parties will use their best collective good faith efforts to
complete and agree on a Joint Interconnection Grooming Plan within
90 days following execution of this agreement.
E.6 BellSouth will establish and adhere to competitive intervals for
the delivery of FOCs, DLRs and facilities. Such intervals need to
ensure that facilities are provisioned in time frames and according
to standards that meet or exceed those that BellSouth provides to
itself for its own network and end users. Intervals should not
exceed the Customer Designated Date (CDD).
E.7 Upon request, BellSouth will provide DeltaCom with read and write
access to the BellSouth maintenance and trouble report systems
including the following systems and/or functionality:
. Trouble reporting/dispatch capability - access must be real
time
. Repair status/confirmation; maintenance/trouble report
systems
. Planned/Unplanned outage reports
E.8 Each Party has the duty to alert the other to any network events
that can result or has resulted in service interruption, blocked
calls, or changes in network performance, on a real time basis.
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<PAGE>
E.9 BellSouth will adopt any multi-ILEC trouble management procedures
and escalation processes developed by the NOF.
E.10 The Parties will work cooperatively to plan and implement
coordinated repair procedures for the local interconnection trunks
and facilities to ensure trouble reports are resolved in a timely
and appropriate manner.
E.11 The Parties will provide each other with a trouble reporting number
that is readily accessible and available 24 hours a day, 7 days a
week. In addition, the Parties will provide each other test-line
numbers and access to test lines.
E.12 The quality of interconnection services should be no less than that
provided by BellSouth for its own services.
E.13 Installation and restoration of interconnection circuits by
BellSouth for DeltaCom will be given equal priority as is given by
BellSouth to similar services performed by BellSouth for any other
telecommunications carrier.
E.14 The time interval for installation of POIs by BellSouth will be
negotiated on an ICB basis, subject to an agreement that
installation of such POI's will be completed within a target of
sixty (60) calendar days.
E.15 Completion confirmation shall be provided to ensure that all
necessary translation work is completed on newly installed
facilities.
E.16 The Parties shall periodically exchange technical descriptions and
forecasts of their interconnection and traffic requirements in
sufficient detail to assure traffic completion to and from all
customers within the appropriate calling areas.
E.17 BellSouth will provide and update an electronic copy of their Switch
Network ID Database with a complete list of features and functions
by switch, NPA/NXXs, business/residence counts and identification,
rate centers, etc.
F. Local Number Assignment
-----------------------
DeltaCom will assign telephone numbers to its customers using at least one
NXX per BellSouth tariffed local exchange metropolitan area; provided, that
sufficient quantities of numbering resources are made available to
DeltaCom.
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G. Cross-Connection to Other Collocators
-------------------------------------
Where one Party collocates in the wire center of the other Party, the
Party operating the wire center shall allow the Party collocated at
the wire center to directly interconnect to any other entity which
maintains a collocation facility at that same wire center. The Party
operating the wire center shall enable such interconnection by
effecting a cross-connection between those collocation facilities, as
jointly directed by the Party collocated at the wire center and the
other collocated entity. For each such cross-connection, the Party
operating the wire center shall charge one-half the otherwise
applicable standard tariff or contract special access cross-connect
rate to the collocated Party, and the identical rate to the other
collocated entity. No other charges shall apply for such cross-
connection.
VI. LOCAL TRAFFIC EXCHANGE
----------------------
A. Exchange of Traffic
-------------------
The Parties agree for the purpose of this Agreement only that local
interconnection is defined as the delivery of local traffic to be
terminated on each party's local network so that customers of either
party have the ability to reach customers of the other party, without
the use of any access code or delay in the processing of the call.
Local traffic for these purposes shall include any telephone call
that originates and terminates in the same LATA and is billed by the
originating exchange outside of BellSouth's service area with respect
to which BellSouth has a local interconnection arrangement with an
independent LEC, with which DeltaCom is not directly connected. The
Parties further agree that the exchange of traffic on BellSouth's
Extended Area Service (EAS) shall be considered local traffic and
compensation for the termination of such traffic shall be pursuant to
the terms of this section. EAS routes are those exchanges within an
exchange's Basic Local Calling Area, as defined in Section A3 of
BellSouth's General Subscriber Services Tariff.
B. Compensation
------------
With the exception of the local traffic specifically identified in
subsection (C) hereafter, each party agrees to terminate local
traffic originated and routed to it by the other party. The Parties
agree that BellSouth will track the usage for both companies for the
period of the Agreement. BellSouth will provide copies of such usage
reports to DeltaCom on a monthly basis. For purposes of this
Agreement, the Parties agree that there will be no cash compensation
exchanged by the parties
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during the term of this Agreement unless the difference in minutes of
use for terminating local traffic exceeds 2 million minutes per state
on a monthly basis. In such an event, the Parties will thereafter
negotiate the specifics of a traffic exchange agreement which will
apply on a going-forward basis.
C. Transitted Traffic
------------------
If either party provides intermediary tandem switching and transport
services for the other party's connection of its end user to a local
end user of: (1) a CLEC other than DeltaCom; (2) an ILEC other than
BellSouth; or (3) another telecommunications company such as a
wireless telecommunications service provider, the party performing
the intermediary function will bill a $0.002 per minute charge.
However, BellSouth agrees that DeltaCom may cross-connect directly to
such third Parties at the POI. In such an event, tariffed cross-
connection non-recurring charges will apply, and no transitting
charge will apply.
VII. MEET-POINT BILLING ARRANGEMENTS
-------------------------------
Both Parties hereto provide interexchange access transport services to
IXCs and other access service customers. Pursuant to the terms of this
Agreement, and to the extent DeltaCom requires meet-point arrangements,
DeltaCom will interconnect at selected BellSouth switches of its choosing
for the purposes of providing certain Switched Access Services. On such
occasions, a portion of the access transport service will be provided by
each of the Parties hereto. This section establishes arrangements intended
to enable each of the Parties hereto to serve and bill their mutual
Switched Access Service customers, on an accurate and timely basis. The
arrangements discussed in this section apply to the provision of both
interLATA and intraLATA Switched Access Services. It is understood and
agreed that DeltaCom is not obligated to provide any of its Switched Access
Service(s) through any specific access tandem switch or access tandem
provider, and may at its sole discretion, with due notice to those
affected, modify its serving arrangements on its own initiative.
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<PAGE>
A. Applicability of OBF Guidelines
-------------------------------
Meet-point billing (MPB) arrangements shall be established between the
Parties to enable DeltaCom to provide, at its option, Switched Access
Services to third Parties via specified LEC switches, in accordance
with the Meet-Point Billing guidelines adopted by and contained in the
Ordering and Billing Forum's MECAB and MECOD documents, except as
modified herein. These arrangements are intended to be used to provide
Switched Access Service that originates and/or terminates on an
DeltaCom-provided Exchange Service, where the transport component of
the Switched Access Service is routed through specified BellSouth
switches.
B. Meet-Point Interconnection
--------------------------
B.1 The Parties shall establish MPB arrangements in each LATA
or locality where switched services are provided by DeltaCom,
between the correspondingly identified Rating Point/Switch
pairs. BellSouth shall provide homing/subtending access
tandem arrangements through the same (or a closely proximate)
switching entity used for access services to BellSouth's end
users. This does not foreclose the possibility that other
mutually agreeable arrangements may be utilized by mutual
agreement of the Parties where appropriate.
B.2 At DeltaCom's discretion, interconnection for the MPB
arrangement shall be established at the POI as described
hereafter, at a collocation facility maintained by DeltaCom
or an affiliate of DeltaCom at specified BellSouth switches,
or at any point mutually agreed to by the Parties, consistent
with the terms and conditions herein.
B.3 Two-way meet point trunks which are separate from the local
interconnection trunk groups will be established to enable
DeltaCom and BellSouth to provide Exchange Access Services to
IXCs via a BellSouth Central Office. No Party shall charge
the other any amount for any meet point facilities unless one
Party is ordering trunks from the other.
B.4 Common Channel Signaling (CCS) shall be utilized in
conjunction with meet-point billing arrangements to the
extent such signaling is technically compatible with and
economically reasonable to provide through the BellSouth
switch, except that MF signaling shall be used on a separate
trunk group for originating FGD access to Exchange Access
Customers that uses the MF FGD signaling protocol. The
Parties may establish CCIS interconnection either directly or
through a third party.
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<PAGE>
B.5 DeltaCom may establish CCS interconnections either directly
or through a third-party. The Parties will exchange TCAP
messages to facilitate full interoperability of CCIS-based
features between their respective networks, including all
CLASS features and functions to its own end users. The
Parties will provide all CCIS signaling, Billing Number,
originating line information (OLI) and any other such similar
service. For terminating FGD, BellSouth will pass CPN if it
receives CPN from FGD carriers. All privacy indicators will
be honored. Where available, network signaling information,
such as Transit Network Selection (TNS) parameter (CCIS
platform) and OZZ/CIC information (non-CCIS environment) will
be provided whenever such information is needed for call
routing or billing. The Parties will follow all OBF adopted
standards pertaining to TNS and OZZ/CIC codes.
B.6 All originating Toll Free Service calls for which BellSouth
performs the Service Switching Point (SSP) function (e.g.,
performs the database query) shall be delivered by DeltaCom
using GR-394 format over a trunk group designated for Toll
Free Service. Carrier Code "0110" and Circuit Code of "08"
shall be used for all such calls. In the event DeltaCom
becomes a toll free service provider, BellSouth shall deliver
traffic using the GR-394 format over a trunk group designated
for Toll Free Service.
B.7 All originating Toll Free Service calls for which DeltaCom
performs the SSP function, if delivered to BellSouth, shall
be delivered by DeltaCom using GR-394 format over the meet
point trunk group for calls destined to IXCs, or shall be
delivered by DeltaCom using GR-317 format over the Local
Interconnection Trunk Group for calls destined to end offices
that directly subtend BellSouth access tandems.
B.8 Originating Feature Group B calls shall be delivered to
BellSouth's tandem using the interLATA trunk groups.
C. Tariffs
-------
DeltaCom and BellSouth will use their best reasonable efforts,
individually and collectively, to maintain provisions in their
respective federal and state access tariffs sufficient to reflect this
MPB arrangement, including appropriate MPB percentages consistent with
applicable industry standard practice and in accordance with Section
VII.F hereafter.
27
<PAGE>
D. Billing and Data Exchange
-------------------------
D.1 Each Party shall implement the "Multiple Bill/Multiple
Tariff" option in order to bill an IXC for the portion of the
jointly provided telecommunications service provided by that
Party. For all traffic carried over the MPB arrangement, each
Party shall only bill the rate elements identified for it in
this Agreement. For transport elements subject to billing
percentages, each Party shall utilize the billing percentages
discussed in Section III.C preceding and Section VII.F
hereafter. The actual rate values for each element shall be
the rates contained in that Party's own effective federal and
state access tariffs. The Parties shall utilize complementary
monthly billing periods for meet-point billing.
D.2 BellSouth may charge the IXC for use of the entrance
facility, the tandem switching and the mutually agreed
portion of non-interconnection transport charges. BellSouth
will not include an element for the Residual Interconnection
Charge (RIC) and DeltaCom will be entitled to bill and
collect the appropriate RIC and/or any other applicable rate
elements.
D.3 Each party will provide to the other access records
sufficient to enable billing to the IXCs. Records shall be
provided in the Exchange Message Record format, Bellcore
Standard BR 010-200-010, as amended.
D.4 BellSouth shall provide to DeltaCom the billing name, billing
address, and CIC of the IXCs and copies of relevant IXC
Access Service Requests (ASRs), in order to comply with the
MPB notification process as outlined in the MECAB document,
on an electronic medium basis using the EMR format.
D.5 BellSouth shall provide DeltaCom, on a daily basis, switched
access detail usage data (EMR Category 1101XX records) on
magnetic tape or via electronic file transfer using EMR
format, for calls from IXCs that have transitted BellSouth's
tandems and terminated to DeltaCom's switching center(s).
D.6 DeltaCom shall provide BellSouth, on a monthly basis,
switched access summary usage data (EMR Category 1150XX
records) on magnetic tape or via electronic file transfer
using EMR format, for calls to IXCs which originate at
DeltaCom's switching center(s).
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<PAGE>
D.7 The Parties will exchange test files to support the initial
implementation of the meet point billing processes provided
for in this Agreement. Exchange of test data will commence
one week after AMA certification begins. These data shall be
actual recorded usage records.
D.8 Each Party shall coordinate and exchange the billing
account reference (BAR) and billing account cross reference
(BACR) numbers for the MPB Service. Each Party shall notify
the other if the level of billing or other BAR/BACR elements
change, resulting in a new BAR/BACR number.
D.9 If access usage data is not processed and delivered by either
Party and sent to the other in a timely manner and in turn
such other Party is unable to bill the IXC, the delivering
Party will be held liable for the amount of lost billing.
D.10 Errors may be discovered by DeltaCom, the IXC or
BellSouth. Both BellSouth and DeltaCom agree to provide the
other Party with notification of any discovered errors within
seven (7) business days of the discovery. In the event of a
loss of data, both Parties shall cooperate to reconstruct the
lost data and if such reconstruction is not possible, shall
accept a reasonable estimate of the lost data based upon
three (3) to twelve (12) months of prior usage data.
D.11 The Parties shall not charge one another for the services
rendered or information provided pursuant to this Section VII
of this Agreement.
E. Toll Free IXC Traffic
---------------------
MPB will apply for all traffic bearing the 800, 888, or any other
non-geographic NPA which may be likewise designated for such traffic in
the future, where the responsible party is an IXC. In those situations
where the responsible party for such traffic is a LEC, full switched
access rates will apply.
F. MPB Billing Percentages
-----------------------
The MPB billing percentage for each DeltaCom Rating Point shall be
calculated according to the following formulas:
29
<PAGE>
In any service jointly provided by BellSouth and DeltaCom for which
meet point billing arrangements are adopted, the meet point billing
percentages shall be based on the relative distances (i.e., airline
mileage) between the meet point and the two rating points as follows:
a b
DeltaCom percentage = ----- BellSouth percentage = -----
(a+b) (a+b)
where "a" is the airline mileage between the relevant DeltaCom rating
point (e.g., serving switch) and the meet point and "b" is the airline
mileage between the BellSouth rating point and the meet point.
G. Special Arrangements
--------------------
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<PAGE>
G.1 In a few instances, the involvement of yet a third
provider of switched access may be needed for
particular traffic. For purposes of customer
billing, when three or more LECs are involved in
the transmission of a particular message, the
intermediate carriers will have no rating point,
and the relevant mileage measurement is between the
two end points.
G.2 In the case of IXC traffic terminating to DeltaCom
ported numbers, the Parties will, unless IXC actual
minutes of use can be measured, account for access
revenue on a state-by-state basis by using
verifiable BellSouth/DeltaCom interstate and
intrastate minutes of use reported on the
applicable ARMIS report at the total IXC access
rates applicable to BellSouth less the
BellSouth/DeltaCom meet point access minutes at the
meet point billing access rates applicable to
BellSouth, with no other subtractions.
G.3 If either Party provides intermediary functions
for network access service connection between an
IXC and another Party, each Party will provide
their own network access services to the IXC on a
meet-point basis. The meet-point billing
arrangement will be through the multiple bill. Each
Party will bill its own network access services
rates to the IXC with the exception of the residual
interconnection charge. Each Party shall bill 50%
of its residual interconnection charges in such
case.
VIII. TOLL TRAFFIC INTERCONNECTION
----------------------------
A. The delivery of interexchange toll traffic by a Party to the
other Party shall be reciprocal and compensation will be
mutual. For terminating its toll traffic on the other Party's
network, each Party will pay the other Party's tariffed
terminating switched access rate, inclusive of the
interconnection charge and the carrier common line rate
elements of the switched access rate. The Parties agree that
their terminating switched rate shall be the rate in effect
when the traffic is terminated.
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<PAGE>
B. For originating and terminating interexchange toll traffic,
each Party shall pay the other Party's tariffed switched
network access service rate elements on a per minute of use
basis. Said rate elements shall be as set out in the Parties'
respective access services tariffs as those tariffs are
amended from time to time during the term of this Agreement.
The appropriate charges will be determined by the routing of
the call. If DeltaCom is the BellSouth end user's
presubscribed interexchange carrier or if the BellSouth end
user uses DeltaCom as an interexchange carrier on a 1OXXX
basis, BellSouth will charge DeltaCom the appropriate tariff
charges for originating network access services. If BellSouth
is serving as the DeltaCom end user's presubscribed
interexchange carrier or if the DeltaCom end user uses
BellSouth as an interexchange carrier on a 1OXXX basis,
DeltaCom will charge BellSouth the appropriate BellSouth
tariff charges for originating network access services.
IX. NUMBER RESOURCE ARRANGEMENTS
----------------------------
A. Nothing in this Agreement shall be construed to in any
manner limit or otherwise adversely impact either Party's
right to request and be assigned any North American Numbering
Plan (NANP) number resources including, but not limited to,
central office (NXX) codes pursuant to the Central Office
Code Assignment Guidelines (1ast published by the Industry
Numbering Committee (INC) as INC 95-0407-008, Revision
4/7/95, formerly ICCF 93-0729-010), or to independently, and
in a technically compatible manner, establish and publish in
any and all switched telecommunications industry routing and
rating databases, by tariff or otherwise, Rate Centers Rating
Points, destination switching entity/office and
routing/tandem information corresponding to such NXX codes.
B. During any period under this Agreement in which it serves as
the NANP administrator for its territory, BellSouth shall
ensure that DeltaCom has nondiscriminatory access to
telephone numbers for assignment to its telephone exchange
service customers, and will assist DeltaCom in applying for
NXX codes for its use in providing local exchange services.
It is mutually agreed that BellSouth shall provide numbering
resources pursuant to the Bellcore Guidelines Regarding
Number Assignment and compliance with those guidelines shall
constitute nondiscriminatory access to numbers. DeltaCom
agrees that it will complete the NXX code application in
accordance with Industry Carriers Compatibility Forum,
Central Office Code Assignment Guidelines, ICCF 93-0729-010.
C. If during the term of this Agreement BellSouth is no longer
the NANP administrator, the Parties agree to comply with the
guidelines, plan or rules adopted pursuant to 47 U.S.C.
(S) 251(e).
32
<PAGE>
D. Each Party agrees to make available to the other, up-to-date
listings of its own assigned NPA-NXX Codes, along with
associated rating points and rate centers.
E. It shall be the responsibility of each Party to program and
update its switches and network systems pursuant to the local
exchange routing guide (LERG) and other switched
telecommunications industry guidelines to recognize and route
traffic to the other Party's assigned NXX codes using that
party's preferred routing at all times. Neither Party shall
impose any fees or charges whatsoever on the other Party for
such activities, except as expressly defined in this
Agreement.
F. Each Party shall be responsible for notifying its customers
of any changes in dialing arrangements due to NPA exhaustion.
Neither party shall be obligated to adopt the specific end
user dialing plan of the other.
G. Administration and assignment of numbers will be moved to a
neutral third party in the future. In the interim, while
BellSouth is still administering numbering, the following
will apply:
1. BellSouth will assign NXXs to DeltaCom on a
nondiscriminatory basis and on the same basis as to
itself.
2. No restriction is placed on the ability to assign NXXs
per rate center.
3. Testing and loading of DeltaCom's NXXs' should be the
same as BellSouth's own.
4. BellSouth cannot discriminate in the allocation of
number and types of NXXs assigned to DeltaCom.
5. BellSouth will assign NXXs to DeltaCom without the
imposition of charges that are not imposed upon itself.
6. BellSouth will load NXXs according to industry
guidelines, including the terminating LATA in which the
NXXs/rate center is located.
7. Until such time that number administration is moved to
an independent third party, BellSouth will provide
routine reporting on NXX availability, fill rates, and
new assignments.
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<PAGE>
8. In the event of NPA-NXX splits, it is agreed that
DeltaCom may continue use of the pre-existing NPA-NXX
for existing customers.
9. BellSouth will supply DeltaCom with copies of its
Local Calling Area Boundary Guide, including all
updates thereto.
10. All BellSouth services provided to DeltaCom pursuant
to this Article will be at no charge to DeltaCom.
X. ACCESS TO POLES, DUCTS, CONDUITS, AND RIGHTS OF WAY
---------------------------------------------------
A. BellSouth agrees to provide to DeltaCom, pursuant to 47
U.S.C. (S) 224, as amended by the Act, nondiscriminatory
access to any pole, duct, conduit, and right-of-way owned or
controlled by BellSouth. BellSouth agrees to provide access
at rates, terms and conditions which are no less favorable
than those provided to any other telecommunications service
provider or cable television provider (CATV), including those
provided to itself or its affiliates.
B. BellSouth must provide access to its unbundled network
interface device.
C. When BellSouth has equipment on, over or under public or
private property, it will permit the use of such equipment by
DeltaCom on an equal and nondiscriminatory basis.
D. Any authorizations to attach to poles, overlashing
requirements, or modifications to the conduit system or other
pathways to allow access to and egress from the system shall
not be hindered, restricted or unreasonably withheld or
delayed. Such access and use shall be on terms and conditions
identical to those that BellSouth provides to itself and its
affiliates for the provision of exchange, exchange access and
interexchange services.
E. BellSouth agrees to take no action to intervene against, or
attempt to delay, the granting of permits to DeltaCom for use
of public rights-of-way or access with property owners.
F. Any costs for improvements to/expansions of poles, etc.,
should be prorated on a nondiscriminatory and neutral basis
among and all users of the facility.
G. No application fees will apply.
34
<PAGE>
H. Fees will be fixed for term of contract.
I. BellSouth will provide routine notification of changes to
poles, conduits, and rights-of-way.
J. BellSouth will provide open access to current pole-line
prints, and conduit prints, make available maps of conduit
and manhole locations, and allow manhole/conduit break-outs,
and audits to confirm usability.
K. BellSouth will provide regular reports on the capacity
status and planned increase in capacity of each of these
access channels to facilitate construction planning.
L. BellSouth will provide information on the location of, and
the availability to access conduit, poles. etc., when
DeltaCom requests such information, within ten (10) working
days after the request.
M. The Parties agree to enter a Standard License Agreement
incorporating specific rates, terms and conditions consistent
with the foregoing.
XI. ANCILLARY SERVICES AND PLATFORM ARRANGEMENTS
---------------------------------------------
A. 800 Traffic
-----------
A.1 BellSouth agrees to compensate DeltaCom, pursuant to
DeltaCom's published originating switched access
charges, including the database query charge, for the
origination of 800 and 888 traffic (combined "800")
terminated to BellSouth.
A.2 DeltaCom will provide to BellSouth the appropriate
records necessary for BellSouth to bill BellSouth's
intraLATA 800 customers. The records provided by
DeltaCom will be in a standard EMR format for a fee,
paid by BellSouth to DeltaCom, of $0.015 per record.
A.3 If DeltaCom provides 800 services to its end users
during the term of this Agreement, it agrees to
compensate BellSouth, pursuant to BellSouth's
originating switched access charges, including the
database query charge, for the origination of 800
traffic terminated to DeltaCom. BellSouth agrees to
provide DeltaCom the appropriate records for DeltaCom
to bill its 800 customers. The records provided will be
in a standard EMR format for a fee, paid by DeltaCom to
BellSouth, of $0.015 per record.
35
<PAGE>
A.4 If during the term of this Agreement, BellSouth is permitted to provide
interLATA 800 services, BellSouth will compensate DeltaCom for the
origination of such traffic in accordance with the above.
A.5 If DeltaCom utilizes BellSouth's 800 database for query purposes only,
the rates and charges shall be as set forth in the applicable BellSouth
Access Services Tariff, as said tariff is amended from time to time
during the term of this Agreement.
A.6 Should DeltaCom require 800 access ten digit screening service from
BellSouth, it shall have signaling transfer points connecting
directly to BellSouth's local or regional signaling transfer point for
service control point database query information. DeltaCom shall
utilize SS7 Signaling links, ports and usage from BellSouth's
interstate access services tariff. 800 access ten digit screening
service is an originating service that is provided via 800 switched
access service trunk groups from BellSouth's SSP equipped end office or
access tandem providing an IXC identification function and delivery of
call to the IXC based on the dialed ten digit number. The rates and
charges for said services shall be as set forth in the applicable
BellSouth access services tariff as said tariff is amended from time to
time during the term of this Agreement.
B. 911/E-911
---------
B.1 The Parties agree to interconnect with each other to provide Basic 911
and E-911 emergency calling services consistent with the terms of
Attachment C-9 hereto.
B.2 For Basic 911 service, BellSouth will provide to DeltaCom a list
consisting of each municipality in each state that subscribes to Basic
911 service. The list will also provide, if known, the E-911
conversion date for each county and, for network routing purposes, a
ten-digit directory number representing the appropriate emergency
answering position for each county subscribing to 911. DeltaCom will
arrange to accept 911 calls from its end users in municipalities that
subscribe to Basic 911 service and translate the 911 call to the
appropriate 10-digit directory number as stated on the list provided by
BellSouth. DeltaCom will route that call to BellSouth at the
appropriate tandem or end office. When a county converts to E-911
service, DeltaCom shall discontinue the Basic 911 procedures and begin
the E-911 procedures, set forth in subsection B.4 below.
36
<PAGE>
B.3 For E-911 service, DeltaCom shall install a minimum of two dedicated
trunks originating form DeltaCom's serving wire center and terminating
to the appropriate E-911 tandem. The dedicated trunks shall be, at
minimum, DS0 level trunks configured either as a 2 wire analog
interface or as part of a digital (1.544 Mb/s) interface. Either
configuration shall use CAMA type signaling with MF pulsing that will
deliver automatic number identification (ANI) with the voice portion of
the call. If the user interface is digital, MF pulses, as well as other
AC signals, shall be encoded per the U-255 Law convention. DeltaCom
will provide BellSouth daily updates to the E-911 database.
B.4 If a municipality has converted to E-911 service, DeltaCom will forward
911 calls to the appropriate E-911 tandem, along with ANI, based upon
the current E-911 end office to tandem homing arrangement as provided
by BellSouth. If the E-911 tandem trunks are not available, DeltaCom
will alternatively route the call to a designated 7-digit local number
residing in the appropriate PSAP. This call will be transported over
BellSouth's interoffice network and will not carry the ANI of the
calling party.
B.5 BellSouth will provide DeltaCom with an electronic interface from which
DeltaCom may input and update subscriber records in the E-911
database. BellSouth shall also provide DeltaCom with an automated
interface to access its Automatic Location Identification (ALI)
database.
B.6 BellSouth and DeltaCom agree that the practices and procedures
contained in the E-911 Local Exchange Carrier Guide For Facility-Based
Providers (LEC Carrier Guide) shall determine the appropriate
procedures and practices of the Parties as to the provision of 911/E-
911 Access. The LEC Carrier Guide shall at a minimum include, or
BellSouth shall separately provide, 911 database update procedures and
911 trunk restoration procedures.
B.7 If DeltaCom requires transport to the BellSouth 911 tandem, DeltaCom
may, at DeltaCom's option, purchase such transport from BellSouth at
rates set forth in either BellSouth's intrastate switched access
services tariff or intrastate special access services tariff.
B.8 BellSouth and DeltaCom will cooperatively arrange meetings to answer
any technical questions that municipal or county coordinators may have
regarding the 9-1-1/E-911 portions of this Agreement.
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<PAGE>
B.9 Where BellSouth is responsible for maintenance of the E-911 database
and can be compensated for maintaining DeltaCom's information by the
municipality, BellSouth shall seek such compensation. BellSouth may
seek compensation for its costs from DeltaCom only if and to the
extent BellSouth is unable to obtain such compensation from the
municipality.
B.10 Nothing herein shall be construed to prevent DeltaCom from opting to
route Basic 911 and E-911 calls to an alternative emergency call
service bureau, to provide such services itself, or to route such
calls directly to a Public Safety Answering Point (PSAP).
C. Provision of Operator Services
------------------------------
C.1 BellSouth will offer to DeltaCom Operator Call Processing Access
Service BLV/BLVI Service and Directory Assistance Access Services.
Rates, terms and conditions are set forth in section VI.F for BLV/BLVI
Service, Attachment C-11 for Directory Assistance Access Services, and
Attachment C-1O for Operator Call Processing Access Services. Each
such attachment is incorporated herein by this reference.
C.2 BellSouth also will offer to DeltaCom CMDS Hosting and the Non Sent
Paid Report System pursuant to the terms and conditions set forth in
Attachment C-12 and Attachment C-13, incorporated herein by this
reference.
D. Transfer of Service Announcements
---------------------------------
When an end user customer changes from BellSouth to DeltaCom, or from
DeltaCom to BellSouth, and does not retain its original telephone number,
the Party formerly providing service to the end user will provide a transfer
of service announcement on the abandoned telephone number. Each Party will
provide this referral service at no charge to the other Party. This
announcement will provide details on the new number to be dialed to reach
this customer.
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<PAGE>
E. Coordinated Repair Calls
------------------------
DeltaCom and BellSouth will employ the following procedures for handling
misdirected repair calls:
E.1 DeltaCom and BellSouth will educate their respective customers as to
the correct telephone numbers to call in order to access their
respective repair bureaus.
E.2 To the extent the correct provider can be determined, misdirected
repair calls will be referred to the proper provider of local exchange
service in a courteous manner, at no charge, and the end user will be
provided the correct contact telephone number. In responding to repair
calls, neither Party shall make disparaging remarks about each other,
nor shall they use these repair calls as the basis for internal
referrals or to solicit customers to market services. Either Party
shall respond with accurate information in answering customer
questions.
E.3 DeltaCom and BellSouth shall provide their respective repair contact
numbers to one another on a reciprocal basis.
F. Busy Line Verification and Interrupt
------------------------------------
F.1 Description
-----------
a. Each Party shall establish procedures whereby its operator bureau
will coordinate with the operator bureau of the other Party in order
to provide Busy Line Verification (BLV) and Busy Line Verification
and Interrupt (BLVI) services on calls between their respective end
users.
b. DeltaCom will route BLV and BLVI traffic to the BellSouth access
tandem. BellSouth wll route BLV and BLVI traffic to the DeltaCom
access tandem.
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<PAGE>
F.2 Compensation
------------
Each Party shall charge the other Party for BLV and BLVI at the
effective rates contained in BellSouth's applicable Local
Interconnection Services Tariff(s).
G. Directory Assistance (DA)
-------------------------
G.1 Description
-----------
At DeltaCom's request, BellSouth will:
a. Provide to DeltaCom, over TOPs trunks, unbranded (or DeltaCom-
branded, where available) directory assistance service which is
comparable in every way to the directory assistance service
BellSouth makes available to interexchange carriers.
b. In conjunction with subparagraph (a) above, provide caller
optional directory assistance call completion service which is
comparable in every way to the directory assistance call
completion service BellSouth generally makes available to its end
users, to the extent BellSouth generally offers such service to
its end users.
c. BellSouth will provide DeltaCom operators on-line access to
BellSouth's DA database.
G.2 Compensation
------------
Initial rates, terms and conditions for DA Services shall be as
provided in Attachment C-11 hereto.
H. Directory Listings and Directory Distribution
---------------------------------------------
H.1 Subject to the execution of an agreement between BellSouth's affiliate,
BellSouth Advertising and Publishing Co. (BAPCO), and DeltaCom in a form
substantially similar to that attached as Attachment C-8, (1) DeltaCom's
customers' primary listings shall be included in the appropriate white
page (resident and business) listings or alphabetical directories, as
well as the directory assistance database, (2) DeltaCom's business
subscribers' listings will be included in all appropriate yellow pages
or classified
40
<PAGE>
directories, and (3) copies of directories shall be delivered to
DeltaCom's customers; all without charge.
H.2 BellSouth shall provide DeltaCom with a magnetic tape or computer disk
containing the proper format to employ in submitting directory listings
and daily updates. DeltaCom shall provide BellSouth with its directory
listings and daily updates to those listings (including new, changed and
deleted listings) in a mutually acceptable format. BellSouth shall
include DeltaCom's customers in the directory assistance database
associated with the areas in which DeltaCom provides exchange services
within the same time frame as BellSouth includes its own customers in
such databases.
H.3 BellSouth and its Affiliates will afford DeltaCom's directory listings
information the same level of confidentiality which BellSouth affords
its own directory listing information, and BellSouth shall ensure that
access to DeltaCom's customer proprietary confidential directory
information will be limited solely to those employees who immediately
supervise or are directly involved in the processing and publishing of
listings and directory delivery. BellSouth will not use DeltaCom's
directory listings for the marketing of BellSouth's telecommunications
services.
I. Access to Signaling and Signaling Databases
-------------------------------------------
I.1 BellSouth will offer to DeltaCom use of its SS7 signaling network and
signaling databases on an unbundled basis at the rates included in
Attachment C-5 hereto. Signaling functionality will be available with
both A-link and B-link connectivity.
I.2 BellSouth agrees to input NXX assigned to DeltaCom into the Local
Exchange Routing Guide (LERG).
I.3 BellSouth will enter DeltaCom line information into its Line Information
Database (LIDB) pursuant to the terms and conditions contained in
Attachment C-6 hereto, incorporated herein by this reference. Entry of
line information into LIDB will enable DeltaCom's end users to
participate or not participate in alternate billing arrangements such as
collect or third number billed calls.
I.4 BellSouth will provide DeltaCom with access to LIDB for call and card
validation purposes pursuant to the rates, terms and conditions
contained in Attachment C-7 hereto, as amended hereafter to include
unbundled local loops.
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<PAGE>
I.5 If DeltaCom utilizes BellSouth's 800 database for query purposes
only applicable BellSouth tariffed rates will apply.
XII. TELEPHONE NUMBER PORTABILITY ARRANGEMENTS
-----------------------------------------
A. The Parties agree to provide interim Service Provider Number
Portability (SPNP) on a reciprocal basis between their networks to
enable their end user customers to utilize telephone numbers associated
with an Exchange Service provided by one Party, in conjunction with an
Exchange Service provided by the other Party, upon the coordinated or
simultaneous termination of the first Exchange Service and activation
of the second Exchange Service. The Parties shall provide reciprocal
SPNP immediately upon execution of this Agreement via remote call
forwarding (RCF or Direct Inward Dialing (DID). SPNP shall operate as
follows:
A.1 An end user customer of Party A elects to become an end user
customer of Party B. The end user customer elects to utilize the
original telephone number(s) corresponding to the Exchange
Service(s) it previously received from Party A, in conjunction with
the Exchange Service(s) it will now receive from Party B. Upon
receipt of a service order assigning the number to Party B, Party A
will implement an arrangement whereby all calls to the original
telephone number(s) will be forwarded to a new telephone number(s)
designated by Party B within the same access where the original NXX
code is used. Party A will route the forwarded traffic to Party B
over the appropriate trunk groups, as if the call had originated on
Party A's network.
A.2 Party B will become the customer of record for the original Party A
telephone numbers subject to the SPNP arrangements. Party A will
provide Party B a single consolidated master billing statement for
all collect, calling card, and third-number billed calls associated
with those numbers, with subaccount detail by retained number. Such
billing statement shall be delivered via either electronic data
transfer, daily magnetic tape, or monthly magnetic tape (for which
option there shall be no charge). Party A shall provide to Party B
the EMR detail records associated with the calls on the master
billing statement.
A.3 Party A will cancel line-based calling cards and will, as directed
by Party B, update its Line Information Database (LIDB) listings
for retained numbers, subject to RCF, and restrict or cancel
calling cards associated with those
42
<PAGE>
forwarded numbers, as directed by Party B, subject to execution of
an LIDB storage agreement in substantially the form attached
hereto.
A.4 Within two (2) business days of receiving notification from the end
user customer, Party B shall notify Party A of the customer's
termination of service with Party B, and shall further notify Party
A as to that customer's instructions regarding its telephone
number(s). Party A will reinstate service to that customer, cancel
the SPNP arrangements for that customer's telephone number(s), or
redirect the SPNP arrangement pursuant to the customer's
instructions at that time.
B. SPNP-RCF is a telecommunications service whereby a call dialed to an
SPNP-RCF equipped telephone number, is automatically forwarded to an
assigned seven or ten digit telephone number within the local calling
area as defined in Section A3 of the BellSouth General Subscriber
Service Tariff. The forwarded-to number is specified by DeltaCom or
BellSouth, as appropriate. Where technologically feasible, the
forwarding party will provide identification of the originating
telephone number, via SS7 signaling, to the receiving party. Neither
party guarantees, however, identification of the originating telephone
number to the SPNP-RCF end user. SPNP-RCF provides a single call path
for the forwarding of no more than one simultaneous call to the
receiving party's specified forwarded-to number. Additional call paths
for the forwarding of multiple simultaneous calls are available on a per
path basis and are in addition to the rate for SPNP-RCF service.
C. The Parties shall provide RCF arrangements to each other at identical
monthly rates. Recurring charges shall not exceed the actual cost of
providing the service. There shall be no non-recurring charges. Until
otherwise verified by reliable cost studies, actual cost for recurring
charges are as follows:
1. Residential Services - $1.15 per line, including 6 call paths;
2. Business Service - $2.25 per ine, including 10 call paths; and
3. Each additional path - $0.50.
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<PAGE>
D. SPNP-DID service provides trunk side access to end office switches for
direct inward dialing to the other Party's premises equipment from the
telecommunications network to lines associated with the other Party's
switching equipment and must be provided on all trunks in a group
arranged for inward service. A SPNP-DID trunk termination, provided with
SS7 signaling only, applies for each trunk voice grade equivalent. In
addition, direct facilities are required from the end office where a
ported number resides to the end office serving the ported end user
customer. Transport mileage will be calculated as the airline distance
between the end office where the number is ported and the POI using the
V&H coordinate method. SPNP-DID must be established with a minimum
configuration of two channels and one unassigned telephone number per
switch, per arrangement for control purposes. Transport facilities
arranged for SPNP-DID may not be mixed with any other type of trunk
group, with no outgoing calls placed over said facilities. SPNP-DID
will be provided only where such facilities are available and where the
switching equipment of the ordering party is properly equipped. Where
SPNP-DID service is required from more than one wire center or from
separate trunk groups within the same wire center, such service provided
from each wire center or each trunk group within the same wire center
shall be considered a separate service. Only customer dialed sent paid
calls will be completed to the first number of a SPNP-DID number group,
however, there are no restrictions on calls completed to other numbers
of a SPNP-DID number group.
E. The Parties hereby agree to negotiate in good faith to establish the
recurring and non-recurring charges, if any, for SPNP through DID. For
this purpose, BellSouth shall provide DeltaCom with its relevant cost
studies, subject to applicable non-disclosure obligations. In the event
that the Parties are unable to agree upon the applicable charges, the
issue shall be resolved in accordance with the process set forth in
Article XXV. In the interim period, the rates contained in Attachment E
hereto will apply.
F. Each Party is responsible for obtaining authorization from the end user
for the handling of the disconnection of the end user's service, the
provision of new local service and the provision of SPNP services. Each
Party is responsible for coordinating the provision of service with the
other to assure that its switch is capable of accepting SPNP ported
traffic. Each Party is responsible for providing equipment and
facilities that are compatible with the other's service parameters,
interfaces, equipment and facilities and is required to provide
sufficient terminating facilities and services at the terminating end of
an SPNP call to adequately handle all traffic to that location and is
solely responsible to ensure that its facilities, equipment and services
do not interfere with or impair any facility, equipment, or service of
the other Party or any of its end users.
44
<PAGE>
G. Each Party is responsible for providing an appropriate intercept
announcement service for any telephone numbers subscribed to SPNP
services for which it is not presently providing local exchange service
or terminating to an end user. Where either Party chooses to disconnect
or terminate any SPNP service, that Party is responsible for designating
the preferred standard type of announcement to be provided.
H. Each Party will be the other's Party's single point of contact for all
repair calls on behalf of each Party's end user. Each Party reserves the
right to contact the other Party's customers, if deemed necessary, for
maintenance purposes.
I. The Parties will migrate from RCF or DID to Permanent Number Portability
(PNP) as soon as practically possible, without interruption of service
(to the degree possible) to their respective customers.
J. Under either an SPNP or PNP arrangement, DeltaCom and BellSouth will
implement a process to coordinate Telephone Numbers Portability. (TNP)
cut-overs with Unbundled loop conversions (as described in Section IV of
this Agreement).
K. The quality of service of calls to ported numbers should be identical to
the quality of service of the calls to non-ported numbers.
L. If the Federal Communications Commission issues regulations pursuant to
47 U.S.C. (S) 251 to require number portability different than that
provided pursuant to this subsection, the Parties agree to fully comply
with those requirements.
45
<PAGE>
XIII. DISCONNECTION OF CUSTOMERS
--------------------------
A. BellSouth shall accept any requests from DeltaCom to disconnect the
service of an existing BellSouth end user, except for BellSouth
public and semipublic telephone service which service is subject to
effective contracts with location providers. BellSouth will not
require end user confirmation prior to disconnecting the end user's
service. BellSouth will accept a request directly from an end user
for conversion of the end user's service from DeltaCom to BellSouth
or will accept a request from another CLEC for conversion of the SPNP
service associated with an end user's service charge from DeltaCom to
the CLEC. BellSouth will notify DeltaCom that such a request has been
processed. This Article shall be subject to Section 258(a) and (b) of
the Telecommunications Act which prohibits illegal changes of carrier
selections and assesses liability for such changes, and any change of
service verification procedures which may be promulgated by the FCC.
DeltaCom and BellSouth shall each execute a blanket letter of
authorization for each state substantially in the form attached as
Attachment F hereto with respect to customer disconnections. The
Parties shall each be entitled to adopt their own internal processes
for verification of customer authorization of disconnection of
service; provided, however, that such processes shall comply with
applicable state and federal law and until superseded shall be deemed
adequate for purposes of this Agreement if such processes comply with
FCC guidelines applicable to Presubscribed Interexchange Carriers
(PIC) changes.
B. If either Party determines that an unauthorized change in local
service provider has occurred, such Party shall reestablish service
with the appropriate local service provider as requested by the end
user and will assess the other Party an Unauthorized Change Charge of
$19.41 per line. The appropriate nonrecurring charges to reestablish
the customer's service with the appropriate local service provider
will also be assessed to the other Party because of the unauthorized
change. These charges shall be adjusted if such Party provides
satisfactory proof of authorization.
C. If BellSouth accepts an order placed by itself or another CLEC (or
local reseller) to disconnect the SPNP to an DeltaCom end user,
BellSouth shall notify DeltaCom of the change within three (3) days
thereof.
XIV. RESALE OF BELLSOUTH LOCAL EXCHANGE SERVICES
-------------------------------------------
BellSouth hereby agrees that DeltaCom may at any time during the term of
this Agreement elect to resell BellSouth's local exchange services under
the terms and
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conditions of any local services resale agreement reached between
BellSouth and any other telecommunications carrier. DeltaCom may select
any such resale agreement at any time prior to the expiration of this
Agreement.
XV. RESPONSIBILITIES OF THE PARTIES
-------------------------------
A. BellSouth and DeltaCom agree to treat each other fairly, non-
discriminatorily, and equally for all items included in this
Agreement or related to the support of items included in this
Agreement.
B. DeltaCom and BellSouth will work cooperatively to minimize fraud
associated with third-number billed calls, calling card calls, or any
other services related to this Agreement. The Parties fraud
minimization procedures are to be cost effective and implemented so
as not to unduly burden or harm one Party as compared to the other.
C. DeltaCom and BellSouth agree to promptly exchange all necessary
records for the proper billing of all traffic.
D. DeltaCom and BellSouth will review engineering requirements on a
quarterly basis and establish forecasts for trunk utilization, POI
trunks, MPB arrangements, E-911, EISCC facility requirements,
quantities of DNCF, loops and other services provided under this
Agreement. New trunk groups will be implemented as dictated by
engineering requirements for both BellSouth and DeltaCom. BellSouth
and DeltaCom are required to provide each other the proper call
information (e.g., originated call party number and destination call
party number) to enable each company to bill in a complete and timely
manner.
E. The Parties will cooperate by exchanging technical information in
order to identify and explore potential solutions to enable DeltaCom
to establish unique rate centers, or to assign a single NXX code
across multiple rate centers.
F. DeltaCom and BellSouth will work jointly and cooperatively in
developing and implementing common manual and/or electronic
interfaces (including, for example, data elements, data format, and
data transmission) from which to place service orders and trouble
reports involving the provision of loops, DNCF, directory assistance,
directory listings, E-911, and other services included in this
Agreement. To the extent reasonable, DeltaCom and BellSouth will
utilize the standards established by industry fora, such as OBF.
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G. BellSouth will support DeltaCom requests related to central office
(NXX) code administration and assignments in an effective and timely
manner. DeltaCom and BellSouth will comply with code administration
requirements as prescribed by the FCC, the state commissions, and
accepted industry guidelines.
H. There will be no re-arrangement, reconfiguration, disconnect, or
other non-recurring fees associated with the initial reconfiguration
of each carrier's traffic exchange arrangements upon execution of
this agreement.
I. BellSouth shall not impose a cross-connect fee on DeltaCom where
DeltaCom accesses 911 or E-911, reciprocal traffic exchange trunks,
and network platform services, through a collocation arrangement at
the BellSouth Wire Center.
J. Notwithstanding any other provision of this Agreement, it is mutually
understood and agreed that both Parties hereto reserve the right to
establish each of the following, consistent with generally accepted
industry standards.
1. Rate centers (location and area within)
2. Points of interchange (including meet points)
3. Switching entity designation and supporting data (including
inbound route choice)
a. end office
b. homing/homed to tandem
4. Association of routing point(s) with end offices, POIs, etc.
5. Published rate center and locality designations.
XVI. NETWORK DESIGN AND MANAGEMENT
-----------------------------
A. The Parties agree to work cooperatively to install and maintain
reliable interconnected telecommunications networks, including but not
limited to, maintenance contact numbers and escalation procedures.
BellSouth agrees to provide public notice of changes in the information
necessary for the transmission and routing of services using its local
exchange facilities or networks, as well as of any other changes that
would affect the interoperability of those facilities and networks.
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B. The interconnection of all networks will be based upon accepted
industry/national guidelines for transmission standards and traffic
blocking criteria.
C. The Parties will work cooperatively to apply sound network
management principles by invoking appropriate network management
controls to alleviate or prevent network congestion.
D. For network expansion, the Parties agree to review engineering
requirements on a quarterly basis and establish forecasts for trunk
utilization. New trunk groups will be added as reasonably warranted.
E. DeltaCom and BellSouth will exchange appropriate information (e.g.,
maintenance contact numbers, network information, information
required to comply with law enforcement and other security agencies
of the Government) to achieve desired reliability. In addition,
DeltaCom and BellSouth will cooperatively plan and implement
coordinated repair procedures to ensure customer trouble reports are
resolved in a timely and appropriate manner.
XVII. TERM
----
A. The term of this Agreement shall be two years, beginning
July 1, 1997.
B. The Parties agree that by no later than July 1, 1998, they shall
commence negotiations with regard to the terms, conditions and
prices of local interconnection to be effective beginning
July 1, 1999.
C. If, within 90 days of commencing the negotiation referred to in
Section XVII.B above, the Parties are unable to satisfactorily
negotiate new local interconnection terms, conditions and prices,
either Party may petition the state commission to establish
appropriate local interconnection arrangements pursuant to
47 U.S.C. 252. The Parties agree that, in such event, they shall
encourage the Commission to issue its order regarding the
appropriate local interconnection arrangements no later than
January 1, 1999. The Parties further agree that in the event the
Commission does not issue its order prior to January 1, 1999 or
if the Parties continue beyond July 1, 1999 to negotiate the
local interconnection arrangements without Commission
intervention, the terms, conditions and prices ultimately ordered
by the Commission, or negotiated by the Parties, will be
effective retroactive to July 1, 1999. Until the revised local
interconnection
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arrangements become effective, the Parties shall continue to
exchange traffic pursuant to the terms and conditions of this
Agreement.
D. The Parties agree that (1) if the FCC or a state commission or
other state or local body having jurisdiction over the subject
matter of this Agreement finds that the terms of this Agreement
are inconsistent in one or more material respects with any of its
or their respective decisions, rules or regulations promulgated,
or (2) if the FCC or a state commission preempts the effect of
this Agreement, then in the event of the occurrence of (1) or (2),
which occurrence is final and no longer subject to administrative
or judicial review, the Parties shall immediately commence good
faith negotiations to conform this Agreement with any such
decision, rule, regulation or preemption. The revised agreement
shall have an effective date that coincides with the effective
date of the original FCC or state commission's action giving rise
to such negotiations. The Parties agree that the rates, terms and
conditions of any new agreement shall not be applied retroactively
to any period prior to such effective date.
E. In the event that BellSouth provides interconnection and/or
temporary number portability arrangements via tariff or has or
enters into an interconnection and/or temporary number portability
agreement with another entity, BellSouth will permit DeltaCom an
opportunity to inspect such tariff or agreement and, upon
DeltaCom's request, BellSouth will immediately offer DeltaCom an
agreement on the same material terms with effect from the date
BellSouth first made such tariff effective or entered into such
arrangement and for the remainder of the term of this Agreement.
The other items covered by this Agreement and not covered by such
tariff or agreement shall remain unaffected and as to such items
this Agreement shall remain in effect.
F. In the event that BellSouth is required by an FCC or a state
commission decision or order to provide any one or more terms of
interconnection or other matters covered by this Agreement that
individually differ from any one or more corresponding terms of
this Agreement, DeltaCom may elect to amend this Agreement to
reflect all of such differing terms (but not less than all)
contained in such decision or order, with effect from the date
DeltaCom makes such election. The other items covered by this
Agreement and not covered by such decision or order shall remain
unaffected and as to such items this Agreement shall remain in
effect.
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XVIII. IMPLEMENTATION OF AGREEMENT
---------------------------
The Parties agree that within 30 days of the execution of this Agreement
they will adopt a schedule for the implementation of this Agreement. The
schedule shall state with specificity, ordering, testing, and full
operational time frames. The implementation shall be attached to this
Agreement as an addendum and specifically incorporated herein by this
reference. All rates within this Agreement will become effective upon
execution of the Agreement.
XIX. UNIVERSAL SERVICE
-----------------
The Parties acknowledge that BellSouth will guarantee the provision of
universal service as the carrier-of-last-resort throughout its territory
in Florida until January 1, 1998 without contribution from DeltaCom.
XX. FORCE MAJEURE
-------------
Neither Party shall be responsible for delays or failures in performance
resulting from acts or occurrences beyond the reasonable control of such
Party, regardless of whether such delays or failures in performance were
foreseen or foreseeable as of the date of this Agreement including,
without limitation: fire, explosion, power failure, acts of God, war,
revolution, civil commotion, or acts of public enemies; any law, order,
regulation, ordinance or requirement of any government or legal body; or
labor unrest, including, without limitation, strikes, slowdowns,
picketing or boycotts; or delays caused by the other Party or by other
service or equipment vendors; or any other circumstances beyond the
Party's reasonable control. In such event the Party affected shall, upon
giving prompt notice to the other Party, be excused from such
performance on a day-today basis to the extent of such interference
(and the other Party shall likewise be excused from performance of its
obligations on a day-for-day basis to the extent such Party's
obligations relate to the performance so interfered with). The affected
Party shall use its best efforts to avoid or remove the cause of
nonperformance and both Parties shall proceed to perform with dispatch
once the causes are removed or cease.
XXI. LIABILITY AND INDEMNIFICATION
-----------------------------
A. Liability Cap.
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l. With respect to any claim or suit, whether based in contract, tort or
any other theory of legal liability, by DeltaCom, any DeltaCom customer
or by any other person or entity, for damages associated with any of
the services provided by BellSouth pursuant to or in connection with
this Agreement, including but not limited to the installation,
provision, preemption, termination, maintenance, repair or restoration
of service, and subject to the provisions of the remainder of this
Article, BellSouth's liability shall be limited to an amount equal to
the proportionate charge for the service provided pursuant to this
Agreement for the period during which the service was affected.
Notwithstanding the foregoing, claims for damages by DeltaCom, any
DeltaCom customer or any other person or entity resulting from the
gross negligence or willful misconduct of BellSouth and claims for
damages by DeltaCom resulting from the failure of BellSouth to honor in
one or more material respects any one or more of the material
provisions of this Agreement shall not be subject to such limitation of
liability.
2. With respect to any claim or suit, whether based in contract, tort or
any other theory of legal liability, by BellSouth, any BellSouth
customer or by any other person or entity, for damages associated with
any of the services provided by DeltaCom pursuant to or in connection
with this Agreement, including but not limited to the installation,
provision, preemption, termination, maintenance, repair or restoration
of service, and subject to the provisions of the remainder of this
Article, DeltaCom's liability shall be limited to an amount equal to
the proportionate charge for the service provided pursuant to this
Agreement for the period during which the service was affected.
Notwithstanding the foregoing, claims for damages by BellSouth, any
BellSouth customer or any other person or entity resulting from the
gross negligence or willful misconduct of DeltaCom and claims for
damages by BellSouth resulting from the failure of DeltaCom to honor in
one or more material respects any one or more of the material
provisions of this Agreement shall not be subject to such limitation of
liability.
B. Neither Party shall be liable for any act or omission of any other
telecommunications company to the extent such other telecommunications
company provides a portion of a service.
C. Neither Party shall be liable for damages to the other Party's terminal
location, POI or the other Party's customers' premises resulting form the
furnishing of a service, including but not limited to the installation and
removal of equipment and associated wiring, except to the extent the damage
is caused by such Party's gross negligence or willful misconduct.
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D. Notwithstanding subsection A, the Party providing services under this
Agreement, its affiliates and its parent company shall be indemnified,
defended and held harmless by the Party receiving such services against any
claim, loss or damage arising from the receiving Party's use of the
services provided under this Agreement, involving: (1) claims for libel,
slander, invasion of privacy or copyright infringement arising from the
content of the receiving Party's own communications; (2) any claim, loss or
damage claimed by the receiving Party's customer(s) arising from such
customer's use of any service, including 911/E-911, that the customer
has obtained from the receiving Party and that the receiving Party has
obtained form the supplying Party under this Agreement; or (3) all other
claims arising out of an act or omission of the receiving Party in the
course of using services provided pursuant to this Agreement.
Notwithstanding the foregoing, to the extent that a claim, loss or damage
is caused by the gross negligence or willful misconduct of a supplying
Party, the receiving Party shall have no obligation to indemnify, defined
and hold harmless the supplying Party hereunder.
E. Neither Party guarantees or makes any warranty with respect to its services
when used in an explosive atmosphere. Notwithstanding subsection A, each
Party shall be indemnified, defended and held harmless by the other Party
or the other Party's customer from any and all claims by any person
relating to the other Party or the other Party's customer's use of services
so provided.
F. No license under patents (other than the limited license to use in the
course of using a service provided pursuant to this Agreement) is granted
by one Party to the other or shall be implied or arise by estoppel, with
respect to any service offered pursuant to this Agreement. Notwithstanding
subsection A, the Party providing a service pursuant to this Agreement will
defend the Party receiving such service against claims of patent
infringement arising solely from the use by the receiving Party of such
service and will indemnify the receiving Party for any damages awarded
based solely on such claims. Such indemnification shall not, however,
extend to claims for patent infringement to the extent the alleged
infringement results from:
l. Modification of the service by someone other than the providing Party
and/or its subcontractors, where there would be no such infringement
or violation in the absence of such modification; or
2. The combination, operation or use of the service with any product,
data or apparatus not provided by the providing Party and/or its
subcontractors, where there would be no such infringement or violation
in the absence of such combination, operation or use.
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G. Promptly after receipt of notice of any claim or the commencement of
any action for which a Party may seek indemnification pursuant to
this Article XXI, such Party (the "Indemnified Party") shall
promptly give written notice to the other Party (the "Indemnifying
Party") of such claim or action, but the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of any
liability it may have to the Indemnified Party except to the extent
the Indemnifying Party has actually been prejudiced thereby. The
Indemnifying Party shall be obligated to assume the defense of such
claim, at its own expense. The Indemnified Party shall cooperate
with the Indemnifying Party's reasonable requests for assistance or
Information relating to such claim, at the Indemnifying Party's
expense. The Indemnified Party shall have the right to participate
in the investigation and defense of such claim or action, with
separate counsel chosen and paid for by the Indemnified Party.
XXII. MOST FAVORABLE PROVISIONS
-------------------------
A. The parties agree that if ---
l. the Federal Communications Commission ("FCC") or the Commission
finds that the terms of this Agreement are inconsistent in one or
more material respects with any of its or their respective
decisions, rules or regulations, or
2. the FCC or the Commission preempts the effect of this
Agreement, then, in either case, upon such occurrence becoming final
and no longer subject to administrative or judicial review, the
parties shall immediately commence good faith negotiations to
conform this Agreement to the requirements of any such decision,
rule, regulation or preemption. The revised agreement shall have an
effective date that coincides with the effective date of the
original FCC or Commission action giving rise to such negotiations.
The parties agree that the rates, terms and conditions of any new
agreement shall not be applied retroactively to any period prior to
such effective date except to the extent that such retroactive
effect is expressly required by such FCC or Commission decision,
rule, regulation or preemption.
B. In the event that BellSouth, either before or after the effective
date of this Agreement, enters into an agreement with any other
telecommunications carrier (an "Other Interconnection Agreement")
which provides for the provision within a particular state covered
under this Agreement of any of the arrangements covered by this
Agreement to be provided in a particular state upon rates, terms or
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<PAGE>
conditions that differ in any material respect from the rates, terms
and conditions for such arrangements set forth in this Agreement
("Other Terms"), then except as provided in Section XXII.F, BellSouth
shall be deemed thereby to have offered such arrangements to DeltaCom
for that state upon such Other Terms, which DeltaCom may accept as
provided in Section XXII.E. In the event that DeltaCom accepts such
offer within sixty (60) days after the Commission approves such Other
Interconnection Agreement pursuant to 47 U.S.C. (S) 252, or within
thirty (30) days after DeltaCom acquires actual knowledge of an Other
Interconnection Agreement not requiring the approval of the Commission
pursuant to 47 U.S.C. (S) 252, as the case may be, such Other Terms
for such arrangement for the particular state shall be effective
between BellSouth and DeltaCom as of the effective date of such Other
Interconnection Agreement. In the event that DeltaCom accepts such
offer more than sixty (60) days after the Commission approves such
Other Interconnection Agreement pursuant to 47 U.S.C. (S) 252, or more
than thirty (30) days after acquiring actual knowledge of an Other
Interconnection Agreement not requiring the approval of the Commission
pursuant to 47 U.S.C. (S) 252, as the case may be, such Other Terms
shall be effective between BellSouth and DeltaCom as of the date on
which DeltaCom accepts such offer.
C. In the event that after the effective date of this Agreement the FCC
or the Commission enters an order (an "Interconnection Order")
requiring BellSouth to provide within a particular state covered under
this Agreement any of the arrangements covered by this Agreement to be
provided in a particular state upon Other Terms, then upon such
Interconnection Order becoming final and not subject to further
administrative or judicial review, except as provided in
Section XXII.F, BellSouth shall be deemed to have offered such
arrangements in that state to DeltaCom upon such Other Terms, which
DeltaCom may accept as provided in Section XXII.E. In the event that
DeltaCom accepts such offer within sixty (60) days after the date on
which such Interconnection Order becomes final and not subject to
further administrative or judicial review, such Other Terms for such
arrangement for the particular state shall be effective between
BellSouth and DeltaCom as of the effective date of such
Interconnection Order. In the event that DeltaCom accepts such offer
more than sixty (60) days after the date on which such Interconnection
Order becomes final and not subject to further administrative or
judicial review, such Other Terms shall be effective between BellSouth
and DeltaCom as of the date on which DeltaCom accepts such offer.
D. In the event that after the effective date of this Agreement BellSouth
files and subsequently receives approval for one or more intrastate or
interstate tariffs (each, an "Interconnection Tariff") offering to
provide in a particular state covered under this Agreement any of the
arrangements covered by this Agreement to be provided
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in a particular state upon Other Terms, then upon such Interconnection
Tariff becoming effective, except as provided in Section XXII.F,
BellSouth shall be deemed thereby to have offered such arrangements in
that state to DeltaCom upon such Other Terms, which DeltaCom may
accept as provided in Section XXII.E. In the event that DeltaCom
accepts such offer within sixty (60) days after the date on which such
Interconnection Tariff becomes effective, such Other Terms for such
arrangements for the particular state shall be effective between
BellSouth and DeltaCom as of the effective date of such
Interconnection Tariff. In the event that DeltaCom accepts such offer
more than sixty (60) days after the date on which such Interconnection
Tariff becomes effective, such Other Terms shall be effective between
BellSouth and DelaCom as of the date on which DeltaCom accepts such
offer.
E. In the event that BellSouth is deemed to have offered DeltaCom the
arrangements covered by this Agreement upon Other Terms, DeltaCom in
its sole discretion may accept such offer either --
l. by accepting such Other Terms in their entirety; or
2. by accepting the Other Terms that directly relate to any of the
following arrangements as a whole:
a. local interconnection,
b. interLATA and IntraLATA toll traffic interconnection,
C. unbundled access to network elements which include: local
loops, network interface devices, switching capability,
interoffice transmission facilities, signaling networks and call-
related databases, operations support systems functions, operator
services and directory assistance, and any elements that result
from subsequent bone fide requests,
d. access to poles, ducts, conduits and rights-of-way,
e. access to 911/E911 emergency network,
f. collocation, or
g. access to telephone numbers.
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The terms of this Agreement, other than those affected by the Other
Terms accepted by DeltaCom, shall remain in full force and effect.
F. Corrective Payment. In the event that --
l. BellSouth and DeltaCom revise this Agreement pursuant to
Section XXII.A, or
2. DeltaCom accepts a deemed offer of Other Terms pursuant to
Section XXII.E, then BellSouth or DeltaCom, as applicable, shall
make a corrective payment to the other party to correct for the
difference between the rates set forth herein and the rates in such
revised agreement or Other Terms for substantially similar services
for the period from the effective date of such revised agreement or
Other Terms until the date that the parties execute such revised
agreement or DeltaCom accepts such Other Terms, plus simple interest
at a rate equal to the thirty (30) day commercial paper rate for
high-grade, unsecured notes sold through dealers by major
corporations in multiples of $1,000.00 as regularly published in The
Wall Street Journal.
XXIII. DEFAULT
-------
If either Party defaults in the payment of any amount due hereunder, or
if either Party violates any other provision of this Agreement, and such
default or violation shall continue for thirty (30) days after written
notice thereof, the other Party may terminate this Agreement forthwith
by written instrument. The failure of either Party to enforce any of the
provisions of this Agreement or the waiver thereof in any instance shall
not be construed as a general waiver or relinquishment of its part of
any such provision but the same shall, nevertheless, be and remain in
full force and effect.
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XXIV. NONDISCLOSURE
-------------
A. All information, including but not limited to specifications,
microfilm, photocopies, magnetic disks, magnetic tapes, drawings,
sketches, models, samples, tools, technical information, data,
employee records, maps, financial reports, and market data,
(i) furnished by one Party to the other Party dealing with customer
specific, facility specific, or usage specific information, other
than customer information communicated for the purpose of
publication or directory database inclusion, or (ii) in written,
graphic, electromagnetic, or other tangible form and marked at the
time of delivery as "Confidential" or "Proprietary," or
(iii) communicated orally and declared to the receiving Party at the
time of delivery, or by written notice given to the receiving Party
within ten (10) days after delivery, to be "Confidential" or
"Proprietary" (collectively referred to as "Proprietary
Information"), shall remain the property of the disclosing Party.
B. Upon request by the disclosing Party, the receiving Party shall
return all tangible copies of Proprietary Information, whether
written, graphic or otherwise, except that the receiving Party may
retain one copy for archival purposes.
C. Each Party shall keep all of the other Party's Proprietary
Information confidential and shall use the other Party's Proprietary
Information only for performing the covenants contained in the
Agreement. Neither Party shall use the other Party's Proprietary
Information for any other purpose except upon such terms and
conditions as may be agreed upon between the Parties in writing.
D. Unless otherwise agreed, the obligations of confidentiality and non-
use set forth in this Agreement do not apply to such Proprietary
Information as:
l. was at the time of receipt already known to the receiving Party
free of any obligation to keep it confidential evidenced by
written-records prepared prior to delivery by the disclosing
Party; or
2. is or becomes publicly known through no wrongful act of the
receiving Party; or
3. is rightfully received from a third person having no direct or
indirect secrecy or confidentiality obligation to the
disclosing Party with respect to such information; or
4. is independently developed by an employee, agent, or contractor
of the receiving Party which individual is not involved in any
manner with the provision of
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services pursuant to the Agreement and does not have any direct
or indirect access to the Proprietary Information; or
5. is disclosed to a third person by the disclosing Party without
similar restrictions on such third person's rights; or
6. is approved for release by written authorization of the
disclosing Party; or
7. is required to be made public by the receiving Party pursuant
to applicable law or regulation provided that the receiving
Party shall give sufficient notice of the requirement to the
disclosing Party to enable the disclosing Party to seek
protective orders.
E. Effective Date. Notwithstanding any other provision of this
Agreement, the Proprietary Information provisions of this Agreement
shall apply to all information furnished by either Party to the
other in furtherance of the purpose of this Agreement, even if
furnished before the date of this Agreement. The obligation to that
information as confidential shall survive the termination of this
Agreement.
XXV. ARBITRATION
-----------
A. Any controversy or claim arising out of, or relating to, this
Contract or the breach thereof shall be settled by arbitration, in
accordance with the rules then obtaining, of the American
Arbitration Association, and judgment upon the award rendered may by
entered in any court having jurisdiction of the controversy or
claim. As an express condition precedent to any legal or equitable
action or proceeding in the event of disputes or controversies as to
the amount of loss or damage arising out of this Contract, such
disputes or controversies shall first be submitted to the
arbitration of two persons, one chosen by each Party, who shall
jointly select a third person. Provided, however, that nothing
contained herein shall preclude either Party from filing any
complaint or other request for action or relief with the FCC or the
appropriate state commission, including any appeals thereof. The
Party which does not prevail shall pay all reasonable costs of the
arbitration or other formal complaint proceeding, including
reasonable attorney's fees and other legal expenses of the
prevailing Party.
B. Nothing herein shall preclude DeltaCom from seeking state commission
arbitration, pursuant to sections 251-53 of the Telecommunications
Act, of issues upon which the Parties hereto were unable to reach
agreement during the negotiations hereof. The Parties acknowledge,
for example, that they were unable to reach agreement on
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the availability, rates and terms of local sub-loop unbundling, local
loop multiplexing, switch port charges, access to databases, etc.,
and that such issues will be submitted for resolution by the state
commissions through arbitration. BellSouth hereby waives any right to
contest DeltaCom's ability to seek state commission and/or FCC review
of such unresolved issues.
XXVI. WAIVERS
-------
Any failure by either Party to insist upon the strict performance by the
other Party of any of the provisions of this Agreement shall not be
deemed a waiver of any of the provisions of this Agreement, and each
Party, notwithstanding such failure, shall have the right thereafter to
insist upon the specific performance of any and all of the provisions of
this Agreement.
XXVII. GOVERNING LAW
-------------
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Georgia.
XXVIII. ARM'S LENGTH NEGOTIATIONS
-------------------------
This Agreement was executed after arm's length negotiations between the
undersigned Parties and reflects the conclusion of the undersigned that
this Agreement is in the best interests of all Parties.
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XXIX. NOTICES
-------
Any notices required by or concerning this Agreement shall be sent to
the Parties at the addresses shown below:
GENERAL COUNSEL Account Manager
-------------------- BellSouth Telecommunications, Inc.
DELTACOM, INC. South E4E1
-------------------- 3535 Colonnade Parkway
SUITE 101 Birmingham, Alabama 35243
--------------------
700 BOULEVARD SOUTH
--------------------
HUNTSVILLE, AL 35802
--------------------
Each Party shall inform the other of any changes in the above
addresses.
XXX. ENTIRE AGREEMENT
----------------
This Agreement and its Attachments, incorporated herein by this
reference, sets forth the entire understanding and supersedes prior agreements
between the Parties relating to the subject matter contained herein and merges
all prior discussions between them, and neither Party shall be bound by any
definition, condition, provision, representation, warranty, covenant or promise
other than as expressly stated in this Agreement or as is contemporaneously or
subsequently set forth in writing and executed by a duly authorized officer or
representative of the Party to be bound thereby.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
/s/ Tom Mullis /s/ Jerry Hendrix
- ----------------------------------- -------------------------------------
DELTACOM, INC. BELLSOUTH
TELECOMMUNICATIONS, INC.
By: Tom Mullis By: Jerry Hendrix
Title: Sr. V.P. Title: Director
Date: 3/12/97 Date: 3/12/97
Address: Suite 101 Address: 675 W. Peachtree Street, N.E.
700 Boulevard South Atlanta, Georgia 30375
Huntsville, AL 35802
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ATTACHMENT A
RESERVED FOR FUTURE USE
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ATTACHMENT B
DEFINITIONS
1. "Access Service Request" or "ASR" means an industry standard form used
by the Parties to add, establish, change or disconnect trunks for the purposes
of interconnection.
2. "Advanced Intelligent Network" or "AIN" means a network switching and
architecture concept that centralizes intelligence in databases and application
processors internal to the network rather than in central office switching
systems. AIN enables the network to complete interactions (or actions) regarding
routing, signaling and information quickly and accurately. The AIN concept
permits intelligent database systems and application processors to be either
centralized or distributed throughout one network.
3. "Advanced Intelligent Network Features" or "AIN/IN Features" refers to
the replacement or enhancement of electronic switching and electronic network
hardware and software functions via the use of distributed network based
processors and Common Channel Interoffice Signaling (CCIS/SS7). For example,
SCPs and STCs are part of the advanced intelligent network. AIN also features a
"service creation environment" which permits the end user or reseller to create,
and modify, in near real time, their own network routing instructions for calls
to their facilities, creating, in effect a user customizable virtual network.
4. "Affiliate" means a person that (directly or indirectly) owns or
controls, is owned or controlled by, or is under common ownership or control
with, another person. For purposes of this paragraph, the term "own" means to
own an equity interest (or equivalent thereof) or more than 10 percent.
5. "American National Standards Institute" or "ANSI" is a private, non-
profit organization representing more than 1,300 corporations, 30 government
agencies, 20 institutions and 250 trade, labor, consumer, technical and
professional organizations which sets voluntary standards for the United States
(U.S.). ANSI has established an Information Infrastructure Standards Panel. ANSI
is appointed by the U.S. State Department as a representative of the U.S. to the
ITU's International Standards Organization.
6. "Automated Report Management Information System" or "ARMIS" means the
most current ARMIS 4308 report issued by the FCC.
7. "Automatic Number Identification" or "ANI" is a telecommunications
carrier signaling parameter that identifies, through industry standard network
interfaces and formats (either
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SS7/CCIS (preferred), or in band signaling (predecessor technology), the billing
number of the calling party. This functionality is also known and referred to as
"Calling Party Number" or "CPN." This term is not to be limited by "Called Party
Identification" service, another product that is frequently required by call
centers.
8. "Bell Communications Research" or "BellCore" means an organization
owned jointly by the RBOC that conducts research and development projects for
them.
9. "Busy Line Verification/BLVI Traffic" or "BLV/BLVI Call" refers to an
operator call in which the end user inquires as to the busy status of, or
requests an interruption of, a call on an Exchange Service.
10. "Calling Party Number" or "CPN" means a common channel signalling
parameter which refers to the number transmitted through the network identifying
the calling party.
11. "Carrier Identification Code" or "CIC" means a three or four digit
number assigned to an IXC that identifies that carrier's traffic.
12. "Central Office Switch," "Central Office" or "CO" refers to either a
means a Switching entity or the physical location (site) which houses a
traditional central office switch and its peripherals within the public switched
telecommunications network, including but not limited to:
a. "End Office Switches" which are Class 5 switches from which End User
Telecommunications Services are directly connected and offered.
b. "Tandem Office Switches" which are Class 4 switches which are used
to connect and switch trunk circuits between and among Central Office Switches.
c. "Remote Switching Module" or "RSM" refers to a Central Office
architecture element that permits the Central Office switch the ability to
extend either line or trunk side interfaces, with all typical service features
and functions to a cabinet which is physically remote from the home CO site, and
where stand alone capability may or may not be implemented. RSMs are sometimes
also referred to as "switches" in the BellSouth infrastructure inventory
discussions and to that extent may be used as interchangeable terms.
d. "Central Office Switches" may be employed as combination End Office
and Tandem Office Switches (combination Class 5/Class 4).
13. "Central Office Equipment" refers to the traditional Central Office
Switch itself and all of the peripheral electronics (network elements) that
supply network-based processing functions
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other than "transport." Network elements which provide "Transport" are generally
referred to as "Outside Plant" equipment or electronics.
14. "Centralized Message Distribution System" or "CMDS" means the billing
record and clearing house transport systems that incumbent LECs use to exchange
out-collects, in-collects and Carrier Access Billing System ("CABS") records.
15. "CLASS Features" refers to features and functions (products) which
become available on the "line side" of the Central Office through the use of
common channel signalling system seven (CCIS/SS7.) CLASS features include, but
are not necessarily limited to: Automatic Call Back, Call Trace, Caller ID and
Related Blocking Features, Distinctive Ringing/Call Waiting, Selective Call
Forward, and Selective Call Rejection. See also: "Software-based network
elements and services."
16. "Commission" means the appropriate regulatory agency in each of
BellSouth's nine state regions, Alabama, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, South Carolina, and Tennessee.
17. "Common Channel (Interoffice) Signaling" or "CCIS" means a method of
digitally transmitting call set-up and network control data over separate
physical or virtual connections from those which normally carry the actual call
user connections. This technology supersedes "in-band" signalling. The current
industry standard for common carrier network signaling is called Signaling
System 7.
18. "Cross Connect" refers to the equipment physical or logical "meet
point" between network elements.
a. For example, within a wire center, it is a connection between line
termination blocks on the two sides of a distribution frame or between
individual line terminations on the same side of the frame. Cross connections
are made to route traffic from one group of lines to another specific group of
lines on the distribution frame, or to route traffic from one individual line to
another specific line on the distribution frame.
b. A piece of manual, electromechanical or electronic apparatus
designed to make and rearrange the cross connections among the lines that
terminate on a distribution frame. Cross-connect devices are employed where
rearrangement of transmission circuits occur infrequently.
19. "Customer Local Area Signalling Services" or "CLASS" means features
available to end users based on availability of CCIS, including, without
limitation, Automatic Callback, Call Trace, Caller ID and related blocking,
Distinctive Ringing, Call Waiting, Selective Call Forward and Selective Call
Rejection.
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20. "DID" or "Direct Inward Dialing" is a feature which allows callers on
the public switched network to directly dial a specific PBX or Centrex extension
telephone.
21. "Directory Number Call Forwarding" or "DNCF" is one form of Interim
Number Portability ("ISPNP") which is provided through call routing and call
forwarding capabilities. DNCF will forward calls dialed to an original telephone
number to a new telephone number on a multi-path basis. DNCF is not limited to
listed directory numbers.
22. "Digital Loop Carrier" or "DLC" is as defined in BellCore TR-TSY-
000008, "Digital Interface Between the SLC-96 Digital Loop Carrier System and
Local Digital Switch" and TR-TSY-00303, "Integrated Digital Loop Carrier (IDLC)
Requirements, Objectives and Interface."
23. "Digital Service - Level 0" or "DS-0" means a signal rate of
64 kilobits per second.
24. "Digital Service - Level 1" or "DS-1" is an industry standard
telecommunications transport channel which can support a digital signaling rate
of 1.544 Mbps (Mega Bits Per Second) at industry standard performance levels.
Unless identified and priced as "fractional," this channel is assumed to be
fully available
25. "Digital Service - level 3" or "DS-3" is an industry standard
telecommunications transport channel which can support a digital signal rate of
44.736 Mbps (Mega Bits Per Second) at industry standard performance levels.
Unless identified and priced as "fractional," this channel is assumed to be
fully available.
26. "DSX" or "Digital and Access Cross-connect System ("DACS") is a cross-
connection product (including a mounting bay/panel) used for termination of
equipment and facilities operating at digital rates.
27. "Electronic Data Interchange," "Electronic File Transfer" or "EFT" is a
process which utilizes an electronic format and protocol to send/receive digital
data business documents between different companies' computers over phone lines.
There are several generally accepted industry standards for EFT, pending
acceptance of a single common standard.
28. "Exchange Access" means the offering of access to telephone exchange
services or facilities for the purpose of the origination or termination of
telephone toll services.
29. "Exchange Message Record" or "EMR" is a term used to refer to the
current standard used for exchange of telecommunications message information
among Local Exchange Carriers for billable, non-billable, sample, settlement and
study data. EMR format is currently contained in
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BR-0l0-200-010 CRIS Exchange Message Record, a Bellcore document which has
traditionally defined Bell standards for exchange message records.
30. "Exchange Service" is a traditional marketing term used to refer to a
service offered to end users which provides the end user with a telephonic
connection to, and a unique local telephone number address on, the public
switched telecommunications network, and which enables such end user to
generally place calls to, or receive calls from, other stations on the public
switch telecommunications network. Exchange Services include, but are not
limited to, basic residence and business line service, PBX trunk line service,
pay telephone stations, pay phone line service, Centrex and Centrex-like line
services, AIN, and ISDN line/trunk services. Exchange Service does not
traditionally include Private Line, Toll, Switched and Special Access (digital
channel) services, which have traditionally been separately billed and
regulated, although today these services are frequently formed from and bundled
within common transport and network elements.
31. "Feature Group A" or "FGA" means FGA interexchange access as defined in
BellSouth's FCC Tariff No. l.
32. "Feature Group B" or "FGB" means FGB interexchange access as defined in
BellSouth's FCC Tariff No.1.
33. "Feature Group D" or "FGD" means FGD interexchange access as defined in
BellSouth's FCC Tariff No. l.
34. "Interconnection" means the connection between network elements that
enable the formation of network systems. The objective of interconnection is to
provide transport and transparent interoperation among separate pieces of
equipment, transmission facilities, etc., within, between or among networks. The
architecture of interconnection may include several industry standard or
regulatory structured methods including, but not limited to, collocation
arrangements ("physical" and "virtual" collocation) arrangements via industry
standard interface arrangements.
35. "Interconnection Point," "Point of Interconnection" or "POI" includes
all points where DeltaCom is entitled to interconnect with BellSouth under the
terms of this Agreement, including, without limitation, points on the line side
and trunk side of each Network Element.
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36. "Interface" refers to the physical and logical point or points on a
given network element where transmission, operations, administration,
maintenance, provisioning and management connections are made. Specifically,
the Interface includes (1) a common boundary between two or more items of
equipment, (2) a physical point of demarcation between two devices where all the
signals which pass are defined; the definition includes the type, quality and
function of the interconnection circuits, as well as the type and form of
signals interchanges by those circuits, and (3) the procedure, codes and
protocols enabling dissimilar devices to communicate. The original equipment
manufacturer of the network element generally incorporates one or more standard
(or in some cases, proprietary) interfaces to each network element that allows
the element to "plug into" and become part of the overall integrated
telecommunications system. The same interfaces are used by both the incumbent
and the competitive LECs. The technical specifications of the element's
interface(s) are specified by manufacturer prior to sale. Compliance to industry
standards organizations interface specifications, and the modular ability to
retrofit subsequent industry standard specifications is requited by the buyer of
any given network element.
37. "Interexchange Carrier" or "IXC" traditionally means a provider of
stand-alone interexchange telecommunications services. Under the new Act, the
term IXC may be interpreted to embrace any competitive intermediary
telecommunications carrier providing switched (and/or private line) services
between switching entities operated by local exchange service providers (BOC-
LEC, Independent-LEC, Competitive-LEC, Wireless-LEC). IXC connectivity is
typically an access services arrangement. The use of this term does not preclude
the provider from also offering bundled telecommunications services.
38. "Integrated Services Digital Network" or "ISDN" refers to a switched
network service that provides end-to-end digital connectivity for the
simultaneous transmission of voice, data, video or multimedia services. Basic
Rate Interface-ISDN (BRI-ISDN) provides for digital transmission of two 64 Kbps
bearer channels and one l6 Kbps data channel (2B + D). Primary Rate Interface-
ISDN (PRI-ISDN) provides for digital transmission of twenty-three (23) 64 Kbps
bearer channels and one (1) 16 Kbps data channel (23B + D). Unless identified
and priced as "fractional" both BRI and PRI ISDN circuits are assumed to be
fully available.
39. "Interim Number Portability" or "INP" refers to the temporary means by
which BellSouth allows customers to retain their existing telephone numbers when
changing from one local exchange carrier to another. This service provides
transparent delivery of Telephone Number Portability ("TNP") capabilities, from
a customer standpoint in terms of call completion, and from a carrier standpoint
in terms of compensation, through the use of call routing, forwarding, and
addressing capabilities. The interim nature of these arrangements result from
the fact that their performance and cost cannot meet or sustain end-user
customer or co-carrier expectations. Standards for permanent number portability
will be set by regulatory stricture, and both Parties agree to implementation of
permanent number portability at the earliest possible point in time.
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40. "InterLATA Service" means telecommunications between a point located in
one LATA and a point located outside such area.
41. "Intermediary function" means the delivery of local traffic from a
local exchange carrier other than BellSouth; an ALEC other than DeltaCom;
another telecommunications company such as a wireless telecommunications
provider through the network of BellSouth or DeltaCom to an end user of
BellSouth or DeltaCom.
42. "IntraLATA Service" means telecommunications between a point located in
one LATA and a point located in the same LATA.
43. "International Telecommunications Union" or "ITU" is a United Nations
organization which comprises the organization previously known as the CCITT.
Open Standards Interconnection (OSI) standards are established by the ITU.
Telecommunications Management Network (TMN) standards are a subset of the OSI
model. The American National Standards Institute (ANSI) is appointed by the
State Department as a U.S. representative to the ITU's ISO.
44. "Line Side" refers to local loop interface ports of an end office
switch that are programmed to treat the circuit as a local line connected to an
ordinary telephone station set.
45. "Link" or "Loop" are synonyms for a communications channel or circuit
on the line side or the trunk side of the common carrier switching element. This
term has been used as a marketing term to refer to an element of "Exchange
Service" whereby BellSouth provides transport between the Minimum Point of Entry
(MPOE) at an end user premise and the BellSouth wire center from which the
transport is extended. The communications channel, circuit or group of channels
or circuits which are segmented from a transmission medium that extends from
BellSouth's Central office or wire center's Main Distribution Frame, DSX-panel,
or functionally comparable piece of equipment, to a demarcation point or
connector block in/at a customer's premises. "Links" are communications channels
or circuits, which may be provided as 2-wire or 4-wire copper pairs, as radio
frequencies or as a channel on a high-capacity feeder/distribution facility so
long as all industry standard interface, performance, price, privacy,
reliability and other operational characteristics are functionally transparent
and are equal to or better than that of dedicated copper pairs. Examples of
communications channels or circuits that are "links" or "loops" include, but are
not limited to:
46. "Basic Voice Grade Line/Link/Circuit" is a basic voice grade line which
is a two wire circuit or equivalent voice frequency channel for the transmission
of analog signals with an approximate bandwidth of 300 to 3000 Hz (3 Khz analog
or 56 Kbps digital (POTS grade, capable of transmitting voice or analog data
transmissions up to 28.8 BPS with current generation modems). In addition, Basic
Links must meet all RELRA and USF requirements for "basic telephone service"
imposed by State and Federal regulatory authorities. Digital signaling,
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transmission performance and reliability characteristics for basic "link"
circuits are a matter of industry standard, having an expected measured loss or
gain of approximately +/-6dB, and a signal to noise ratio that does not exceed
(fill-in) and capable of supporting fully functional connections for up to 2
miles from the nearest electronic network element. Within the 300 to 3000 Hz
range, "Basic Links" will support all standard signalling arrangements including
repeat loop start, loop reverse battery, or ground start seizure and disconnect
in one direction (toward the end office switch), and repeat ringing in the other
direction (toward the end user).
a. "ISDN link/loop/circuit is an ISDN link which provides a 2-wire ISDN
digital circuit connection that will support digital transmission of two 64 Kbps
clear channels and one 16 Kbps data channel (2B+D), suitable for provision of
BRI-ISDN service. ISDN links shall be provisioned by least cost planning
methodologies sufficient to insure industry standard interface, performance,
price, reliability and operational characteristics are functionally transparent
and are equal to or better than dedicated copper pairs. All things being equal,
"Broadband ISDN" is preferred to CO-based ISDN circuits. Unless specifically
identified and priced as "fractional" these circuits are assumed to be fully
available.
b. "4-Wire DS-1 Digital Grade Links" will support full duplex transmission
of isochronous serial data at 1.544 Mbps, and provide the equivalent of 24 voice
grade channels. Unless specifically identified and priced as "fractional" these
circuits are assumed to be fully available.
47. "Local Exchange Carrier" or "LEC" means any carrier that provides local
common carrier telecommunications services to business and/or residential
subscribers within a given LATA and interconnects to other carriers for the
provision of alternative telecommunications products or services, including, but
not limited to toll, special access, and private line services. This includes
the Parties to this Agreement. The term "Incumbent-LEC" or "I-LEC" is sometimes
used to refer to the dominant LEC for a particular locality (such as BellSouth).
Such Incumbent-LECs include both Bell Operating Companies ("BOCs") and non-BOC
LECs, which are often referred to as "Independent-LECs." By contrast, new
entrants into the local exchange market are sometime referred to as "Competitive
LECs" or "CLECs," or sometimes as "Alternative LECs" or "ALECs."
48. "Local Exchange Routing Guide" or "LERG" means a BellCore Reference
customarily used to identify NPA-NXX routing and homing information, as well as
network element and equipment designations.
49. "Local Traffic" means any telephone call that originates in one exchange
or LATA and terminates in either the same exchange or LATA, or a corresponding
Extended Area Service ("EAS") exchange. The terms Exchange, and EAS exchanges
are defined and specified in Section A3. of BellSouth's General Subscriber
Service Tariff.
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50. "Local Interconnection" means (1) the delivery of local traffic to be
terminated on each Party's local network so that end users of either Party have
the ability to reach end users of the other Party without the use of any access
code or substantial delay in the processing of the call; (2) the LEC unbundled
network features, functions, and capabilities set forth in this Agreement; and
(3) Service Provider Number Portability sometimes referred to as temporary
telephone number portability to be implemented pursuant to the terms of this
Agreement.
51. "Local Interconnection Trunks/Trunk Groups" means equipment and
facilities that provide for the termination of Local Traffic and intraLATA
traffic.
52. "Local Access and Transport Area" or "LATA" means one of 161 contiguous
geographic areas established pursuant to the AT&T Content Decree to define the
permitted operating regions of the RBOCs prior to the enactment of the
Telecommunications Act of 1996.
53. "Long Run Incremental Cost" or "LRIC" refers to the costs a company
would incur (or save) if it increases (or decreases) the level of production of
an existing service or group of services. These costs consist of the costs
associated with adjusting future production capacity and reflect forward-looking
technology and operations methods.
54. "MECAB" refers to the Multiple Exchange Carrier Access Billing (MECAB)
document prepared by the Billing Committee of the Ordering and Billing Forum
(OBF), which functions under the auspices of the Carrier Liaison Committee of
the Alliance for Telecommunications Industry Solutions (ATIS). The MECAB
document published by Bellcore as Special Report SR-BDS-000983, contains the
recommended guidelines for the billing of an access service provided by two or
more LECS (including a LEC and a C-LEC), or by one LEC in two or more states
within a single LATA.
55. "MECOD" refers to the Multiple Exchange Carriers Ordering and Design
(MECOD) Guidelines for Access Services Industry Support Interface, a document
developed by the Ordering/Provisioning Committee under the auspices of the
Ordering and Billing Forum (OBF), which functions under the auspices of the
Carrier Liaison Committee of the Alliance for Telecommunications Industry
Solutions (ATIS). The MECOD document, published by Bellcore as Special Report,
SR STS-002643, establishes methods for processing orders for access service
which is to be provided by two or more LECs.
56. "Meet-Point Billing" or "MPB" refers to a mutual compensation
arrangement whereby two LECs provide the transport element of a switched access
service to one of the LEC's end office switches, with each LEC receiving an
appropriate share of the transport element revenues as defined by law,
regulatory requirements, this agreement or, where permissible, effective access
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tariffs. MPB concepts are also incorporated in some LEC-toll (intraLATA) mutual
compensation arrangements.
57. "Multiple Bill/Multiple Tariff method" means the meet-point billing
method where each LEC (or C-LEC) prepares and renders its own meet point bill to
the IXC in accordance with its own tariff for that portion of the jointly
provided switched Access Service which the LEC (or C-LEC) provides. Bellcore's
MECAB document refers to this method as "Multiple Bill/Single Tariff."
58. "Mutual Traffic Exchange" means that the sole compensation to a Party
for termination of specified categories of traffic shall be the reciprocal
services provided by the other Party. Each Party shall bill its own customers
for such categories of traffic and retain all revenues resulting therefrom.
59. "North American Numbering Plan" or "NANP" is the system of telephone
numbering employed in the United States, Canada, and certain Caribbean
countries.
60. "Network Element" means any facility or equipment used by BellSouth in
the provision of Exchange Services, and all features, functions and capabilities
that are provided by means of such facility or equipment, including numbering
systems, databases, signaling systems, and information sufficient for billing
and collection or used in the transmission, routing or other provision of a
telecommunications service.
61. "Network Management Forum" is a consortium of 160 U.S. and international
carriers and global alliances, including SITA, Unisource and others. Their
objective is to determine specific interoperability needs, so that
manufacturers, of network management equipment will have the detailed technical
specification needed to develop interoperable standards. For the purposes of
this Agreement, both Parties agree to accept the NMF standards and solutions for
OAM&P interconnections.
62. "Numbering Plan Area" or "NPA" is also sometimes referred to as an area
code. This is the three digit indicator which is defined by the "A," "B," and
"C" digits of each "digit" telephone number within the North American Numbering
Plan ("NANP"). Each NPA contains 800 Possible NXX Codes. At present, there are
two general categories of NPA, "Geographic NPAs" and "Non--Geographic NPAS." A
"Geographic NPA" is associated with a defined geographic area, and all telephone
numbers bearing such NPA are associated with services provided within that
Geographic area. In some locations, and ultimately with number portability, more
than one area code will be associated with many geographic areas. A "Non-
Geographic NPA," also known as a "Service Access Code" (SAC Code) is typically
associated with a specialized telecommunications service which may be provided
across multiple geographic NPA areas; 500, 800, 900, 700, and 888 are examples
of Non-Geographic NPAS.
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63. "NXX," "NXX Code," "Central Office Code" or "CO Code" is defined by the
"D," "E," and "F" digits of a 10-digit telephone number within the North
American Numbering Plan. Each NXX Code contains 10,000 station numbers.
Historically, entire NXX code blocks have been assigned to specific individual
local exchange end office switches, because, in general, this approach did not
conflict with geographic numbering except as the CO approached number
exhaustion. Where there are multiple COs in the same geographic area, this
assignment method must change. With the advent of end-user telephone number
portability, the usual one-on-one association on an NXX with an end office
switching entity will be severed.
64. "OAM&P" or "Operations, Administration, Maintenance and Provisioning
Functions" are those automated and manual functions which insure quality of
service and least cost planning, management and operations for
telecommunications service providers. These functions, have traditionally been
addressed through the user of operations support, decision support and
administrative support systems, and are now generally in the process of being
integrated under client-server and mainframe network management platforms such
as HP's Open View, IBM's NetView and SUN's various network management product
sets.
65. "OZZ Codes" define FGD call paths through a LEC's access Tandem Office
Switch.
66. "Percent of Interstate Usage" or "PIU" means a factor to be applied to
terminating access services minutes of use to obtain those minutes that should
be rated as interstate access services minutes of use. The numerator includes
all interstate "nonintermediary" minutes of use, including interstate minutes of
use that are forwarded due to service provider number portability less any
interstate minutes of use for Terminating Party Pays services, such as 800
Services. The denominator includes all "nonintermediary", local, interstate,
intrastate, toll and access minutes of use adjusted for service provider number
portability less all minutes attributable to terminating party pays services.
67. "Percent Local Usage" or "PLU" means a factor to be applied to
intrastate terminating minutes of use. The numerator shall include all
"nonintermediary" local minutes of use adjusted for those minutes of use that
only apply local due to Service Provider Number Portability. The denominator is
the total intrastate minutes of use including local, intrastate toll, and
access, adjusted for Service Provider Number Portability less intrastate
terminating party pays minutes of use.
68. "Permanent Number Portability" means the use of a database solution to
provide fully transparent TNP for all customers and all providers without
limitation.
69. "Port" and "Slot" are terms used to describe physical interfaces and
traffic carriage capacity of some network elements. One "port" is needed for
each connection capable of carrying
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one message into or out of the network element to other network elements. One
"slot" is needed within each network element for each message to be handled
simultaneously with other messages. Port categories include, but are not limited
to:
a. "2-wire analog line port" is a line side switch connection employed to
provide basic residential and business type analog telephone services.
b. "2-wire ISDN digital line port" is a set of Basic Rate Interface (BRI)
line side switch connections which actually consists of multiple paths or
interfaces to the switching network (2B + D). It is employed to provide
residential and business type digital telephone services. The port connections
may or may not be the same Central Office switch (network element) that provides
analog services. When ISDN is provisioned as "broadband" ISDN through current
generation digital switches the cost causation is totally different than when
the digital service is provisioned as a set of CO port attachments.
c. "2-wire analog DID trunk port" is a direct inward dialing (DID) trunk
side switch connection employed to provide incoming trunk-side services. Each
port provisioned permits one simultaneous connection to the customer premises
equipment.
d. "4-wire DS-1 digital DID trunk port" is a direct inward dialing (DID)
trunk side switch connection which is time division multiplexed to provide the
equivalent of 24 analog incoming trunk type DID trunk ports.
e. "4-wire DS-1 digital CBWT trunk port" is a trunk side switch
connection which is time division multiplexed to provide the equivalent of 24
analog incoming trunk ports which may be programmed as DID, CBWT, TIE, or
dedicated private trunk circuits.
f. "4-wire ISDN digital DS-1 trunk port" is a Primary Rate Interface
(PRI) trunk side switch connection which is time division multiplexed to provide
the equivalent of 23 digital one or two-way trunk ports and one signalling trunk
port (23 B+D), where the B channels can be programmed as digital DID, CBWT, TIE,
Private Line or Special Access trunk circuits. The port connections may or may
not be the same Central Office switch (network element) that provides analog
services.
70. "Rate Center" currently refers to a specific geographic point,
designated by latitude and longitude, a corresponding V and H coordinate pair,
and an associated geographic area which has heretofore been defined by the
incumbent LEC industry to be associated with switched message telecommunications
services (MTS). Rate centers, sometimes also known as exchange areas, often
determine the regions within which particular classes, features, and pricing for
exchange services are uniformly administered. Each NPA-NXX code combination is
associated with a single rate center, although any one such code may only
service a fraction of the rate center area when the rate
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center areas circumscribes multiple serving wire centers. Where retail MTS
services contain a distance sensitive rate element, the valuation of that
element utilizes the calculated distance between the V and H coordinate pairs of
the originating and terminating rate centers.
71. "Rating Point" means the vertical and horizontal coordinates associated
with a particular telephone number for rating purposes.
72. "Routing Point" traditionally refers to a location which a LEC or CLEC
has designated on its own network as the homing (routing) point for traffic
inbound to Telecommunications Services provided by the LEC or CLEC which bear a
certain NPA-NXX designation. The Routing Point is employed to calculate mileage
measurements for the distance-sensitive transport element charges of Switched
Access Services. At present, Bellcore Practice BR 795-100-100, places the
Routing Point at either an "End Office" location, or a "LEC Consortium Point of
Interconnection." According to that same Bellcore Practice, examples of the
latter shall be designated by a common language location identifier (CLLI) code
with (x)KD in positions 9,10,11, where (x) may be any alphanumeric A-Z or 0-9.
Nothing in this Agreement shall be construed to preclude either Party hereto
from establishing its own Routing Points.
73. "Service Control Point" or "SCP" is network element of the common
channel signaling network to which informational requests for service handling,
such as routing, are directed and processed. The SCP is a real-time processor
with a database system that, based on a query from a Service Switching Point
("SSP"), performs software-based common carrier, subscriber or application-
specific service logic, and then sends instructions back to the SSP on how to
continue call processing.
74. "Signal Transfer Point" or "STP" is a network element (presently a
packet switch) that routes signaling messages among Service Switching Points
(SSPs), Service Control Points (SCPs), Signaling Points (SPs) and other network
elements in order to set up calls and to query databases for digital
telecommunications services using CCIS/SS7 and software-based common carrier
telecommunications services.
75. "Software-based Network Elements and Services" refers to those features,
functions and services which are inherent capabilities of the current Central
Office Equipment (e.g., the #5ESS 5E8 or 5E9 software program, or an end-office
or CO-based peripheral processor), and can be activated with relatively minor
cost such as local programming or right to use fees. Examples of such services
include CENTREX, electronic station equipment functions.
76. "Subscriber Traffic" or "Subscriber Call(s)" refers to calls between two
or more telecommunications service users, where both telecommunications services
users bear NPA-NXX designations associated with the same LATA or other
authorized area (e.g., Extended Area Service
ATTACHMENT B
Page 13
<PAGE>
Zones in adjacent LATAs). The traditional definition of Subscriber Traffic
includes the traffic types have included as "local calling," "extended area
service (EAS)," and "intraLATA toll."
77. "Switched Access Detail Usage Data" shall mean a category 1101XX record
as defined in the EMR Bellcore Practice BR 0l0-200-O10.
78. "Switched Access Summary Usage Data" shall mean a category 1150XX
record as defined in the EMR Bellcore Practice BR 010-200-O10.
79. "Switched Access Service" means the offering of facilities for the
purpose of the origination or termination of traffic to or from
telecommunications services offered in a given area. Switched Access Services
include: Feature Group A, Feature Group B, Feature Group D, 800 access, and 900
access.
80. "Synchronous Optical Network" or "SONET" is a set of optical interface
standards that allow optical transmission at rates from 51.4 Mbps to 13.22 Gbps.
Synchronous optical network standard is an ultra-high-speed, fiber-optic
transmission standard developed by Bellcore for large-scale, fiber-based digital
transmission networks that use equipment form many different manufacturers. It
is the first telecom industry agreement on standardized interfaces between fiber
optic transmission systems and is well on the way to becoming an international
standard. Because all SONET-compatible devices speak a common language, network
administrators will gain network-wide use of advanced operation and maintenance
systems, regardless of who made individual network components. The SONET
standard is built around a 51.84 Mbps basic communications channel that is
multiplexed upward. SONET line-rate standards now include network bandwidths up
to 2.488 Gbps, a rate equivalent to 48 basic SONET communications channels.
SONET network standards incorporate present-day 1.544 Mbps DS-1 service and 44.6
Mbps DS-3 service as subsets of the 51.84 Mbps SONET basic channel. SONET will
eventually become the primary avenue for transporting broadband ISDN services.
Major network equipment manufacturers are introducing network products claiming
conformity to the SONET standard.
81. "Telecommunications" means the transmission, between or among points
specified by the user, of information of the user's choosing, without change in
the form or content of the information as sent or received.
82. "Telecommunications Act of 1996" or "Act" means Public Law 104-104 of
the United States Congress effective February 8, 1996. The Act amended the
Communications Act of 1934 (47, U.S.C. Section 1 et seq.).
83. "Telecommunications Carrier" means any provider of telecommunications
services.
ATTACHMENT B
Page 14
<PAGE>
84. "Telecommunications Service" means the offering of telecommunications
for a fee directly to the public, to such classes of users as to be effectively
available to the public, or to telecommunications carriers, regardless of the
facilities used.
85. "Telephone Number Portability" or "TNP" is the means by which BellSouth
allows customers to retain their existing telephone numbers when changing from
one local exchange carrier to another. This service provides transparent
delivery of telephone number capabilities, from a customer standpoint in terms
of call completion, and from a carrier standpoint in terms of compensation,
through the use of call routing, forwarding, and addressing capabilities.
Permanent number portability standards will be set by regulatory action, and
both Parties agree to implementation of permanent number portability at the
earliest possible point in time. The performance and cost of permanent number
portability meets end-user customer or co-carrier expectations on a sustainable
basis. (See also Interim Number Portability and Permanent Number Portability.)
86. "Total Service Long Run Incremental Cost" or "TSLRIC" is the total
additional cost incurred by a telecommunications services provider to produce
the entire quantity of a service, group of services, or basic network functions,
given that the telecommunications services provider already provides all its
other services. TSLRIC is based on the least cost, most efficient technology
that is capable of being implemented at the time the decision to provide the
service is made.
87. "Toll Free Service" means service provided with any dialing sequence
that invokes toll-free (i.e., 800-like) service processing. Toll Free Service
includes calls to the Toll Free Service 800/888 NPA SAC codes.
88. "Transit Calls" or "Intermediary Function" means intraLATA calls (local
and toll) sent between the Parties originating from or terminating to an end
user of a third-party LEC, CLEC, wireless provider, or other carrier or calls
sent between the Parties destined for or originating from an LYC.
89. "Trunk Side" refers to a central office switch connection that is
capable of, and has been programmed to treat the circuit as connecting to
another switching entity. Trunk side connections offer those transmission and
signaling features appropriate for the connection of switching elements, and
cannot be used for the direct connection of ordinary telephone station sets.
Incoming telecommunications services from the trunk to the line-side and for
trunk-side-to-trunk side connections within any switching element should
experience no less than a P.001 blocking probability in the average peak busy
hour of the year, and should meet or exceed this level at all other times. This
is a means to ensure that end-to-end blocking, which is cumulative, does not
exceed a consistent P.02 for all call types in a multi-carrier network.
ATTACHMENT B
Page 15
<PAGE>
90. "Wire Center" denotes a building or space within a building which serves
as an aggregation point on a given carrier's network, where transmission
facilities and circuits are connected or switched. Wire Center can also denote a
building in which one or more central offices, used for the provision of
telecommunications services are located. The Parties hereby agree that
interconnection will be available at any wire center which meets any or all
legislative, judicial and regulatory eligibility standards for interconnection.
Interconnection services and access to these interconnections shall not
unreasonably by withheld by either Party on any grounds.
91. "Undefined Terms." The Parties acknowledge that terms may appear in
this Agreement which are not defined and agree that any such terms shall be
construed in accordance with their customary usage in the telecommunications
industry as of the effective date of this Agreement.
ATTACHMENT B
Page 16
<PAGE>
ATTACHMENT C-1
Unbundled Products and Services and New Services
Service: Virtual Collocation
Description: Virtual Expanded Interconnection Service (VEIS) provides for
location interconnection in collocator-provided/BellSouth leased
fiber optic facilities to BellSouth's switched and special
access services, and local interconnection facilities.
State(s): All
Rates, Terms
and
Conditions: In all states, the rates, terms and conditions will be applied
as set forth in Section 20 of BellSouth Telecommunication's
Inc.'s Interstate Access Service Tariff, F.C.C. No.1.
Service: Physical Collocation
Description: Per FCC (10/19/92 FCC Order, para 39)
Physical Collocation is whereby "the interconnection party pays
for LEC central office space in which to locate the equipment
necessary to terminate its transmission links, and has physical
access to the LEC central office to install, maintain, and
repair this equipment."
State(s): All
Rates, Terms
and
Conditions: In all states, the rates and availability will be as provided in
the "rates for Physical Interconnection" tables which follow.
<PAGE>
ATTACHMENT C-1 (cont'd)
RATES FOR PHYSICAL INTERCONNECTION
<TABLE>
<CAPTION>
====================================================================================================================================
Rate Element Application/Description Type of Charge Rate
====================================================================================================================================
<S> <C> <C> <C>
Application Fee Applies per arrangement per Nonrecurring Tariff Rates
location (same as virtual)
- ------------------------------------------------------------------------------------------------------------------------------------
Space Preparation Fee Applies for survey and design of Nonrecurring ICB - See Note 1
space, covers shared building Will not be less than $1800
modification costs - not to exceed $8500 unless
HVAC or power plant update.
If so, rates to be ICB.
- ------------------------------------------------------------------------------------------------------------------------------------
Space Construction Fee Covers materials and construction Nonrecurring $29,744.00
of optional cage in 100 square See Note 2
foot increments
- ------------------------------------------------------------------------------------------------------------------------------------
Cable Installation Fee Applies per entrance cable Nonrecurring Tariff Rates
(same as virtual)
- ------------------------------------------------------------------------------------------------------------------------------------
Floor Space Per square foot, for Zone A and Monthly Recurring $7.50/$6.75
Zone B offices, respectively See Note 3
- ------------------------------------------------------------------------------------------------------------------------------------
Power Per ampere based on manufacturer's Monthly Recurring $5.14 per ampere
specifications
- ------------------------------------------------------------------------------------------------------------------------------------
Cable Support Structure Applies per entrance cable Monthly Recurring $13.35 per cable
- ------------------------------------------------------------------------------------------------------------------------------------
POT Bay Optional Point of Termination Monthly Recurring $1.20/$5.00
bay; rate is per DS1/DS3 cross- See Note 4
connect, respectively
- ------------------------------------------------------------------------------------------------------------------------------------
Cross-Connects Per DS1/DS3, respectively Monthly Recurring $8.00/$72.48
- ------------------------------------------------------------------------------------------------------------------------------------
Security Escort First and additional half hour As Required $41.00/25.00 B
increments, per tariff rate in $48.00/$30.00 O
Basic time (B), Overtime (O), $55.00/$35.00 P
and Premium time (P)
====================================================================================================================================
</TABLE>
Note 1: Will be determined at the time of the application based on building and
space modification requirements for shared space at the requested CO
Note 2: Applies only to collocators who wish to purchase a steel-gauge cage
enclosure. Carries may also pay $330.00 per square foot for the first
100 square feet and $242.00 for each additional 100 square feet in the
same CO in lieu of space preparation and construction fees. This option
does not apply where HVAC, power plant or both upgrade is required.
Note 3: See attached list for Zone A offices as of May 1996. This list will be
amended monthly.
Note 4: Applies when collocator does not supply their own POT bay.
<PAGE>
ATTACHMENT C-1 (cont'd)
BellSouth Zone A Offices - as of May 1996 EX = Exempt from Physical
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATE CITY OFFICE CLLI/
STATUS
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
AL Birmingham Main & Toll BRHMALMA EX
- --------------------------------------------------------------------------------
Montgomery Main & Toll MTGMALMT
- --------------------------------------------------------------------------------
Mobile Azalea MOBLALAZ
- --------------------------------------------------------------------------------
FL Boca Raton Boca Teeca BCRTFLBT
- --------------------------------------------------------------------------------
Fort Lauderdale Main Relief FTLDFLMR
- --------------------------------------------------------------------------------
Cypress FTLDFLCY
- --------------------------------------------------------------------------------
Plantation FTLDFLPL
- --------------------------------------------------------------------------------
Jacksonville Beach Main JCBHFLMA
- --------------------------------------------------------------------------------
Jacksonville Arlington JCVLFLAR
- --------------------------------------------------------------------------------
Beachwood JCVLFLBW
- --------------------------------------------------------------------------------
Clay Street JCVLFLCL
- --------------------------------------------------------------------------------
Southpoint JCVLFLJT EX
- --------------------------------------------------------------------------------
Normandy JCVLFLNO
- --------------------------------------------------------------------------------
Riverside JCVLFLRV
- --------------------------------------------------------------------------------
San Jose JCVLFLSJ EX
- --------------------------------------------------------------------------------
San Marco JCVLFLSM
- --------------------------------------------------------------------------------
Westconnett JCVLFLWC
- --------------------------------------------------------------------------------
Mandarin Avenues MNDRFLAV EX
- --------------------------------------------------------------------------------
Mandarin Loretto MNDRFLLO
- --------------------------------------------------------------------------------
Lake Mary Lake Mary LKMRFLMA EX
- --------------------------------------------------------------------------------
Miami Grande MIAMFLGR
- --------------------------------------------------------------------------------
Palmetto MIAMFLPL
- --------------------------------------------------------------------------------
Alhambra MIAMFLAE
- --------------------------------------------------------------------------------
Bayshore MIAMFLBA
- --------------------------------------------------------------------------------
Metro MIAMFLME
- --------------------------------------------------------------------------------
Melbourne Main MLBRFLMA
- --------------------------------------------------------------------------------
Orlando Magnolia ORLDFLMA
- --------------------------------------------------------------------------------
Azalea Park ORLDFLAP
- --------------------------------------------------------------------------------
Sand Lake ORLDFLSL
- --------------------------------------------------------------------------------
Pinecastle ORLDFLPC
- --------------------------------------------------------------------------------
Pinehills ORLDFLPH
- --------------------------------------------------------------------------------
West Palm Beach Annex (Main Annex) WPBHFLAN
</TABLE>
<PAGE>
ATTACHMENT C-1 (cont'd)
<TABLE>
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
GA Athens Athens ATHNGAMA
- --------------------------------------------------------------------------------
Atlanta Courtland St ATLNGACS
- --------------------------------------------------------------------------------
Peachtree Pl ATLNGAPP
- --------------------------------------------------------------------------------
Buckhead ATLNGABU
- --------------------------------------------------------------------------------
East Point ATLNGAEP
- --------------------------------------------------------------------------------
Toco Hills ATLNGATH
- --------------------------------------------------------------------------------
Sandy Springs ATLNGASS
- --------------------------------------------------------------------------------
Lilburn Lilburn LLBNGAMA
- --------------------------------------------------------------------------------
Smyrna Power Ferry SMYRGAPF
- --------------------------------------------------------------------------------
Smyrna Main SMYRGAMA
- --------------------------------------------------------------------------------
Tucker Tucker Main TUKRGAMA EX
- --------------------------------------------------------------------------------
Roswell Roswell Main RSWLGAMA
- --------------------------------------------------------------------------------
Norcross Norcross Main NRCRGAMA
- --------------------------------------------------------------------------------
Marietta Marietta Main MRRTGAMA
- --------------------------------------------------------------------------------
Dunwoody Dunwoody Main DNWDGAMA
- --------------------------------------------------------------------------------
Alpharetta Alphareta Main ALPRGAMA
- --------------------------------------------------------------------------------
Columbus Columbus Main CLMBGAMT
- --------------------------------------------------------------------------------
KY Louisville Armory Place LSVLKYAP EX
- --------------------------------------------------------------------------------
Westport Rd LSVLKYWE EX
- --------------------------------------------------------------------------------
Beechmont LSVLKYBE
- --------------------------------------------------------------------------------
Bardstown Road LSVLKYBR EX
- --------------------------------------------------------------------------------
Fern Creek LSVLKYFC
- --------------------------------------------------------------------------------
JTown LSVLKYJT
- --------------------------------------------------------------------------------
Matthews LSVLKYSM
- --------------------------------------------------------------------------------
Third Street LSVLKYTS
- --------------------------------------------------------------------------------
LA New Orleans Main NWORLAMA
- --------------------------------------------------------------------------------
Baton Rouge Main BTRGLAMA
- --------------------------------------------------------------------------------
MS Hattiesburg Hattiesburg Main HTBGMSMA
- --------------------------------------------------------------------------------
Jackson Cap Pearl JCSNMSCP
- --------------------------------------------------------------------------------
Vicksburg Vicksburg VCBGMSMA
- --------------------------------------------------------------------------------
NC Cary Central NARYNCCE
- --------------------------------------------------------------------------------
Chapel Hill Rosemay CPHLNCRO
- --------------------------------------------------------------------------------
Charlotte Caldwell CHRLNCCA
- --------------------------------------------------------------------------------
South Boulevard CHRLNCBO
</TABLE>
<PAGE>
ATTACHMENT C-1 (cont'd)
<TABLE>
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
Derita CHRLNCDE
- --------------------------------------------------------------------------------
Erwin CHRLNCER
- --------------------------------------------------------------------------------
Lake Point CHRLNCLP
- --------------------------------------------------------------------------------
Reid CHRLNCRE EX
- --------------------------------------------------------------------------------
Sharon Amity CHRLNCSH
- --------------------------------------------------------------------------------
University CHRLNCUN EX
- --------------------------------------------------------------------------------
Greensboro Eugene St GNBONCEU
- --------------------------------------------------------------------------------
Raleigh Morgan RLGHNCMO
- --------------------------------------------------------------------------------
New Hope RLGHNCHO
- --------------------------------------------------------------------------------
Salisbury Main SLBRNCMA
- --------------------------------------------------------------------------------
Winston Salem Fifth Street WNSLNCFI
- --------------------------------------------------------------------------------
Ashville O'Henry AHVLNCOH
- --------------------------------------------------------------------------------
SC Charleston Dial & Toll CHTNSCDT
- --------------------------------------------------------------------------------
Columbia Senate St CLMASCSN EX
- --------------------------------------------------------------------------------
At. Andrews CLMASCSA
- --------------------------------------------------------------------------------
Greenville D&T GNVLSCDT
- --------------------------------------------------------------------------------
Woodruff Road GNVLSCWR EX
- --------------------------------------------------------------------------------
Spartenburg Main SPBGSCMA
- --------------------------------------------------------------------------------
TN Knoxville Main KNVLTNMA
- --------------------------------------------------------------------------------
Memphis Bartlett MMPHTNBA
- --------------------------------------------------------------------------------
Chickasaw MMPHTNCT
- --------------------------------------------------------------------------------
Eastland MMPHTNEL
- --------------------------------------------------------------------------------
Germantown MMPHTNGT
- --------------------------------------------------------------------------------
Main MMPHTNMA EX
- --------------------------------------------------------------------------------
Oakville MMPHTNOA
- --------------------------------------------------------------------------------
Southland MMPHTNSL
- --------------------------------------------------------------------------------
Nashville Main & Toll NSVLTNMT
- --------------------------------------------------------------------------------
Airport NSVLTNAP
- --------------------------------------------------------------------------------
Brentwood NSVLTNBW
- --------------------------------------------------------------------------------
Crieve Hall NSVLTNCH
- --------------------------------------------------------------------------------
Donelson NSVLTNDO
- --------------------------------------------------------------------------------
Inglewood NSVLTNIN
- --------------------------------------------------------------------------------
Sharondale NSVLTNST
- --------------------------------------------------------------------------------
University NSVLTNUN
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
ATTACHMENT C-2
Unbundled Products and Services and New Services
Service: Unbundled Exchange Access Loop
Description: Provides the connection from the serving central office to a
subscriber's premises and is rated on a distance sensitive
basis. It is engineered to meet the same parameters as a
residence or business exchange access line.
BellSouth shall allow DeltaCom to access the following Loop
types (in addition to those Loops available under applicable
tariffs) unbundled from local switching and local transport in
accordance with the terms and conditions set forth herein:
"2-Wire Analog Voice Grade Loops" or "Analog 2W" which support
analog transmission of 300-2000 Hz, repeat loop start, loop
reverse battery, or ground start seizure and disconnect in one
direction (toward the End Office Switch), and repeat ringing in
the other direction (toward the Customer). Analog 2W include
Loops sufficient for the provision of PBX trunks, pay telephone
lines and electronic key system lines. Both "pure copper" and
"Unintegrated Digital Loop Carrier" (ULDC) systems shall be made
available.
"4-Wire Analog Voice Grade Loops" or "Analog 4W" which support
transmission of voice grade signals using separate transmit and
receive paths and terminate in a 4-wire electrical interface.
Both "pure copper" and "Unintegrated Digital Loop Carrier"
(ULDC) systems shall be made available.
"2-Wire ISDN Digital Grade Links" or "BRI ISDN" which support
digital transmission of two 64 kbps bearer channels and one 16
kbps data channel. BRI IDSN is a 2B+D Basic Rate Interface-
Integrated Services Digital Network (BRI-ISDN) Loop which will
meet national ISDN standards.
"2-Wire ADSL-Compatible Loop" or "ADSL 2W" is a transmission
path which facilitates the transmission of up to a 6 Mbps
digital signal downstream (toward the Customer) and up to a 640
kpbs digital signal upstream (away form the Customer) while
simultaneously carrying an analog voice signal. An ADSL-2W is
provided over a 2-Wire non-loaded twisted copper pair
provisioned using revised resistance design guidelines and
<PAGE>
meeting ANSI Standard T1.413-1995-007R2. An ADSL-2W
terminates in a 2-wire electrical interface at the
Customer premises and at the BellSouth Central Office
frame.
"2-Wire HDSL-Compatible Loop" or "HDSL 2W" is a
transmission path which facilitates the transmission of a
768 kbps digital signal over a 2-Wire non-loaded twisted
copper pair meeting the specifications in ANSI T1E1
Committee Technical Report Number 28. HDSL compatible
Loops are available only where existing copper facilities
can meet T1E1 Technical Report Number 28 specifications.
"4-Wire HDSL-compatible Loop" or "HDSL 4W" is a
transmission path which facilitates the transmission of a
1.544 Mbps digital signal over two 2-Wire non-loaded
twisted copper pairs meeting the specifications in ANSI
T1E1 Committee Technical Report Number 28. HDSL
compatible Loops are available only where existing copper
facilities can meet the specifications.
"Integrated Digital Loop Carrier" or "Integrated DLC" is
defined in BellCore TR-TSY-00303, "Integrated Digital
Loop Carrier (ILDC) Requirements, Objectives and
Interface."
Rate(s): The Parties hereby agree to submit the issue of
rate structure and rate levels to state commission
arbitration.
State(s): Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North
Carolina, South Carolina, Tennessee
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Rate Elements Monthly Nonrecurring
Charges
- ---------------------------------------------------------------------
<S> <C> <C>
Unbundled Exchange
Access Loop $X.XX $X.XX
Unbundled Exchange
Access IOC
- Fixed $X.XX $X.XX
- 1-8 Miles $X.XX N/A
- 9-25 Miles $X.XX N/A
- Over 25 Miles $X.XX N/A
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
ATTACHMENT C-3
Unbundled Products and Services and New Services
Service: Channelization System for Unbundled Exchange Access Loops
Description: This new rate element provides the multiplexing function for
Unbundled Exchange Access Loops. It can convert up to 96 voice
grade loops to DS1 level for connection with the DeltaCom's
point of interface. The multiplexing can be done on a
concentrated basis (delivers at 2 DS1 level to customer
premise) or on a non-concentrated basis (delivers at 4 DSI level
to customer premise) at the option of the customer.
In addition to the following rates elements, 1.544 Mbps local
channel and/or interoffice channel facilities may be required as
set forth in E7 of BellSouth Telecommunication's Inc.'s
Intrastate Access Service Tariff for non-collocated DeltaComs.
Rates: The Parties hereby agree to submit the issue of rate structure
and rate levels to state commission arbitration.
State(s): Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina, Tennessee
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Monthly Nonrecurring Charges
<S> <C> <C> <C>
Rate Elements First Add'l
Unbundled Loop
Channelization System
(DS1 to VG), Per System $X.XX $X. XX N/A
Central Office Channel
Interface (circuit
specific plug-in
equipment), 1 per
circuit $X.XX $X.XX $X.XX
-------------------------------------------------------------------
</TABLE>
<PAGE>
ATTACHMENT C-4
Unbundled Products and Services and New Services
Service: Unbundled Exchange Ports
Description: An exchange port is the capability derived from the central office
switch hardware and software required to permit end users to
transmit or receive information over BellSouth's public switched
network. It provides service enabling and network features and
functionality such as translations, a telephone number, switching,
announcements, supervision and touch-tone capability.
In addition, a BellSouth provided port with outgoing network
access also provides access to other services such as operator
services, long distance service, etc. It may also be combined with
other services available in BellSouth's Intrastate Access Service
Tariffs as technically feasible.
When an Unbundled Port is connected to BellSouth provided
collocated loops, cross-connection rate elements are required as
set forth in Section 20 of BellSouth Telecommunications, Inc.'s
Interstate Access Tariff, FCC No. 1.
Rates: The Parties hereby agree to submit the issue of rate structure and
rate levels to state commission arbitration.
<TABLE>
<CAPTION>
Alabama Florida Georgia
=================================================================================================================
Rate Elements Rates Per Rate Elements Rates Rate Elements Rate
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Monthly Monthly Monthly
Residence Port $X.XX Residence Port $X.XX Residence Port $X.XX
Business Port $X.XX Business Port $X.XX Business Port $X.XX
PBX Trunk Port $X.XX PBX Trunk Port $X.XX PBX Trunk Port $X.XX
Rotary Service $X.XX Rotary Service $X.XX Rotary Service $X.XX
Primary Rate ISDN NAS $X.XX
Usage-Mileage Bands
A (0 miles) $X.XX init. min. Useage-(STS) Usage-(STS)
$X.XX init. min. - init. min. $X.XX - setup per call $X.XX
B (1-10 miles) $X.XX init. min. - add'l min. $X.XX - per minute or
$X.XX init. min. fraction thereof $X.XX
C (11-16 miles) $X.XX init. min.
$X.XX init. min.
D (17-22 miles and existing LCA
described in A3.6 greater than 22 $X.XX init. min.
mi.) $X.XX init. min.
$X.XX init. min.
E (23-30 miles) $X.XX init. min.
$X.XX init. min.
F (31-40 miles) $X.XX init. min.
$X.XX init. min.
G (Special Band) $X.XX init. min.
=================================================================================================================
</TABLE>
<PAGE>
ATTACHMENT C-4 (cont'd)
<TABLE>
<CAPTION>
Kentucky Louisiana
====================================================================================================================================
Rate Elements Rates Per Rate Elements Rate Per
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Monthly Monthly
Residence Port $X.XX Residence Port $X.XX
Business Port $X.XX Business Port $X.XX
PBX Trunk Port $X.XX PBX Trunk Port $X.XX
Rotary Service $X.XX Rotary Service $X.XX
Usage-Mileage Bands Usage-Mileage Bands
A (0 miles) $X.XX init. min. O (0 miles) $X.XX init. min.
$X.XX addl. min. $X.XX addl. min.
B (1-10 miles) $X.XX init. min. A (1-10 miles) $X.XX init. min.
$X.XX addl. min. $X.XX addl. min.
C (Greater than 10 miles Limited LCA) $X.XX init. min. B (11-16 miles) $X.XX init. min.
$X.XX addl. min. $X.XX addl. min.
D (1-10 miles beyond Limited LCA) $X.XX init. min. C (17-22 miles) $X.XX init. min.
$X.XX addl. min. $X.XX addl. min.
E (11-16 miles beyond Limited LCA) $X.XX init. min. D (23-30 miles Basic LCA and Intra Parish $X.XX init. min.
$X.XX addl. min. Expanded LCA) $X.XX addl. min.
F (17-22 miles beyond Limited LCA $X.XX init. min.
$X.XX addl. min. E (Greater than 30 miles Basic LCA and $X.XX init. min.
G (23-30 miles beyond Limited LCA) $X.XX init. min. Intra Parish Expanded LCA) $X.XX addl. min.
$X.XX addl. min.
H (31-40 miles beyond Limited LCA) $X.XX init. min. F (23-30 miles Inter-Parish Expanded $X.XX init. min.
$X.XX addl. min. LCA) $X.XX addl. min.
I (Greater than 40 miles beyond Limited $X.XX init. min.
LCA) $X.XX addl. min. G (31-40 miles Inter-Parish Expanded $X.XX init. min.
LCA) $X.XX addl. min.
H (Greater than 40 miles Inter-Parish) $X.XX init. min.
$X.XX addl. min.
====================================================================================================================================
<CAPTION>
Mississippi N. Carolina S. Carolina
====================================================================================================================================
Rate Elements Rates Per Rate Elements Rate Rate Elements Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Monthly Monthly Monthly
Residence Port $X.XX Residence Port $X.XX Residence Port $X.XX
Business Port $X.XX Business Port $X.XX Business Port $X.XX
PBX Trunk Port $X.XX PBX Trunk Port $X.XX PBX Trunk Port $X.XX
Rotary Service $X.XX Rotary Service $X.XX Rotary Service $X.XX
Usage-Mileage Bands Usage-(STS) Usage-(STS)
A (0 miles) $X.XX init. min. - init. min. $X.XX - Basic Svc. area $X.XX
$X.XX addl. min. - add'l min. $X.XX - Expanded Svc. area $X.XX
B (1-10 miles) $X.XX init. min.
$X.XX addl. min.
C (11-18 miles, existing LCA
described in A3.6 greater than 16
miles and calls to county seat greater $X.XX init. min.
than 16 miles) $X.XX addl. min.
D (17-30 miles) $X.XX init. min.
$X.XX addl. min.
E (31-55 miles Biloxi LATA) $X.XX init. min.
$X.XX addl. min.
F (31-55 miles Jackson LATA) $X.XX init. min.
$X.XX addl. min.
G (56-85 miles Biloxi LATA) $X.XX init. min.
$X.XX addl. min.
====================================================================================================================================
<CAPTION>
Tennessee
==========================================================
Rate Elements Rates Per
- ----------------------------------------------------------
<S> <C> <C>
Monthly
Residence Port $X.XX
Business Port $X.XX
PBX Trunk Port $X.XX
Rotary Service $X.XX
Usage-Mileage Bands
A (0-16 miles) $0.02
B (17-30 miles) $0.05 mou
C (greater than 30 miles) $0.10 mou
==========================================================
</TABLE>
<PAGE>
ATTACHMENT C-4 (cont'd)
Special Service Requirements:
1. Switching functionalities in the port element include dialtone,
screening, recognition of service request, recognition of call-
specific information, digit analysis, routing, testing, recordings,
signal generation, call completion or handoff, SSP functionality and
tables, PIC tables, trunk tables, class of service tables, billing
record generation, and AIN tables.
2. DeltaCom's purchase of the port element for a specific switch avails
to it all the features and functionality on that switch.
3. DeltaCom can interconnect loops from any source to the line port(s)
that it purchases on the same terms/conditions/intervals as loops
provided by BellSouth.
4. DeltaCom can use the port element to provide any local exchange
service, including switched access services.
5. Optional functionality to support CLASS/Customer Calling features will
be included with the port element. No additional charges will apply.
6. Functionality to craft Centrex offerings (call transfer, special
dialing, etc.) will be available as part of the port element.
<PAGE>
ATTACHMENT C-5
Unbundled Products and Services and New Services
Service: Signaling
Description: Provides for connection to and utilization of BellSouth's
Signaling System 7 network for both call setup and non-call
setup purposes.
State(s): All
<TABLE>
<CAPTION>
Rate(s):
================================================================================================================================
Monthly Recurring Non- Applied
Rate Elements Rate Rate Recurring Per
================================================================================================================================
<S> <C> <C> <C> <C>
CCS7 Signaling Connection $155.00 [SYMBOL APPEARS HERE] $51 56 Kpbs facility
CCS7 Signaling Termination $355.00 [SYMBOL APPEARS HERE] 0.00 STP Port
CCS7 Signaling Usage* [SYMBOL APPEARS HERE] $0.000023 [SYMBOL APPEARS HERE] Call Set Up Msg.
[SYMBOL APPEARS HERE] $0.000050 [SYMBOL APPEARS HERE] T-Cap Msg.
CCS7 Signaling Usage Surrogate* $395.00 [SYMBOL APPEARS HERE] [SYMBOL APPEARS HERE] 56 Kpbs facility
[SYMBOL APPEARS HERE]
- --------------------------------------------------------------------------------------------------------------------------------
*Where signaling usage measurement capability exists, CCS7 Signaling Usage will be billed on a per signaling message basis.
Where measurement capability does not exist, CCS7 Signaling Usage will be billed on a per 56 Kpbs facility basis.
================================================================================================================================
</TABLE>
<PAGE>
ATTACHMENT C-6
Unbundled Products and Services and New Services
Service: Line Information Database (LIDB)-Storage Agreement
Description: The LIDB Storage Agreement provides the terms and conditions for
inclusion in BellSouth's LIDB of billing number information
associated with BellSouth exchange lines used for Local Exchange
Companies' resale of local exchange service or Service Provider
Number Portability arrangements requested Local Exchange
Companies' on behalf of the Local Exchange company's end user or
for DeltaCom NXX's stored in BellSouth's LIDB. BellSouth will
store in its database, the relevant billing number information
and will provide responses to on-line, call-by-call queries to
this information for purposes of Billed Number Screening, Calling
Card Validation and Fraud Control.
Each time an DeltaCom's data is used BellSouth will compensate
DeltaCom at a rate of 40% of BellSouth's LIDB Validation rate per
query as displayed in Attachment C-13 following.
State(s): All
Rate(s): No Charge
<PAGE>
LINE INFORMATION DATA BASE (LIDB)
STORAGE AGREEMENT
FOR RESOLD LOCAL EXCHANGE LINES, UNBUNDLED LOOPS
AND SERVICE PROVIDER NUMBER PORTABILITY ARRANGEMENTS
This agreement, effective as of _________, 1997, is entered into by and
between BellSouth Telecommunications, Inc. ("BST"), a Georgia corporation, and
________________ ("Local Exchange Company").
WHEREAS, in consideration of the mutual covenants, agreements and
obligations set forth below, the parties hereby agree as follows:
I. SCOPE
This Agreement sets forth the terms and conditions for inclusion in BST's
Line Information Data Base (LIDB) of billing number information associated with
Local Exchange Company's provision (or resale) of local exchange service or
Service Provider Number Portability (SPNP) arrangements requested by Local
Exchange Company on behalf of Local Exchange Company's end user. BST will store
in its data base the relevant billing number information, and BST will provide
responses to on-line, call-by-call queries to this information for purposes
specified below.
LIDB is accessed for:
. Billed Number Screening
. Calling Card Validation for Calling Cards issued by BellSouth
. Fraud Control
II. DEFINITIONS
2.01. Billing number - a number used by BST for the purpose of identifying
an account liable for charges. This number may be a line or a special billing
number.
2.02. Line number - a ten digit number assigned by BST that identifies a
telephone line associated with a resold local exchange service, or with a SPNP
management.
2.03. Special billing number - a ten digit number that identifies a
billing account established by BST in connection with a resold local exchange
service or with a SPNP arrangement.
2.04. Calling Card number - a billing number plus PIN number assigned by
BST.
2.05. PIN number - a four digit security code assigned by BST which is
added to a billing number to compose a fourteen digit calling card number.
<PAGE>
2.06. Toll billing exception indicator - associated with a billing number
to indicate that it is considered invalid for billing of collect calls or third
number calls or both, by the Local Exchange Company.
2.07. Billed Number Screening - refers to the activity of determining
whether a toll billing exception indicator is present for a particular billing
number.
2.08. Calling Card Validation - refers to the activity of determining
whether a particular calling card number exists as stated or otherwise provided
by a caller.
2.09. Billing number information - information about billing number or
Calling Card number as assigned by BST and toll billing exception indicator
provided to BST by the Local Exchange Company.
III. RESPONSIBILITIES OF PARTIES
3.01. BST include billing number information associated with resold
exchange lines or SPNP arrangements in its LIDB. The Local Exchange Company will
request any toll billing exceptions via the Local Service Request (LSR) form
used to order resold exchange lines, or the SPNP service request form used to
order SPNP arrangements.
3.02. Under normal operating conditions, BST shall include the billing
number information in its LIDB upon completion of the service order establishing
either the resold local exchange service or the SPNP arrangement, provided that
BST shall not be held responsible for any delay or failure in performance to the
extent such delay or failure is caused by circumstances or conditions beyond
BST's reasonable control. BST will store in its LIDB an unlimited volume of the
working telephone numbers associated with either the resold local exchange lines
or the SPNP arrangements. For resold local exchange lines or for SPNP
arrangements, BST will issue line-based calling cards only in the name of Local
Exchange Company. BST will not issue line-based calling cards in the name of
Local Exchange Company's individual end users. In the event that Local Exchange
Company wants to include calling card numbers assigned by the Local Exchange
Company in the BST LIDB, a separate agreement is required.
3.03. BST will provide responses to on-line, call-by-call queries to the
stored information for the specific purposes listed in the next paragraph.
3.04. BST is authorized to use the billing number information to perform
the following functions for authorized users on an on-line basis:
2
<PAGE>
(a) Validate a 14 digit Calling Card number where the first 10
digits are a line number or special billing number assigned by BST, and where
the last four digits (PIN) are a security code assigned by BST.
(b) Determine whether the Local Exchange Company has identified
the billing number as one which should not be billed for collect or third number
calls, or both.
3.05. BST will provide seven days per week, 24 hours per day, fraud
control and detection services. These services include, but are not limited to,
such features as sorting Calling Card Fraud detection according to domestic or
international calls in order to assist the pinpointing of possible theft or
fraudulent use of Calling Card numbers; monitoring bill-to-third number and
collect calls made to numbers in BST's LIDB, provided such information is
included in the LIDB query, and establishing Account Specific Thresholds, at
BST's sole discretion, when necessary. Local Exchange Company understands and
agrees BST will administer all data stored in the LIDB, including the data
provided by Local Exchange Company pursuant to this Agreement, in the same
manner as BST's data for BST's end user customers. BST shall not be responsible
to Local Exchange Company for any lost revenue which may result from BST's
administration of the LIDB pursuant to its established practices and procedures
as they exist and as they may be changed by BST in its sole discretion from time
to time.
3.06. Local Exchange Company understands that BST currently has in effect
numerous billing and collection cents with various interexchange carriers and
billing clearing houses. Local Exchange Company further understands that these
billing and collection customers of BST query BST's LIDB to determine whether to
accept various billing options from end users. Additionally, Local Exchange
Company understands that presently BST has no method to differentiate between
BST's own billing and line data in the LIDB and such data which it includes in
the LIDB on Local Exchange Company's behalf pursuant to this Agreement.
Therefore, until such time as BST can and does implement in its LIDB and its
supporting systems the means to differentiate Local Exchange Company's data from
BST's data and the parties to this Agreement execute appropriate amendments
hereto, the following terms and conditions shall apply:
(a) The Local Exchange Company agrees that it will accept
responsibility for telecommunications services billed by BST for its billing and
collection customers for Local Exchange Customer's end user accounts which are
resident in LIDB pursuant to this Agreement Local Exchange Company authorizes
BST to place such charges on Local Exchange Company's bill from BST and agrees
that it shall pay all such charges. Charges for which Local Exchange Company
hereby takes responsibility include, but are not limited to, collect and third
number calls.
(b) Charges for such services shall appear on a separate BST bill
page identified with the name of the entity for which BST is billing the charge.
(c) Local Exchange Company shall have the responsibility to render
a billing statement to its end users for these charges, but Local Exchange
Company's obligation to pay BST for
3
<PAGE>
the charges billed shall be independent of whether Local Exchange Company is
able or not to collect from Local Exchange Company's end users.
(d) BST shall not become involved in any disputes between Local
Exchange Company and the entities for which BST performs billing and collection.
BellSouth will not issue adjustments for charges billed on behalf of an entity
to Local Exchange Company. It shall be the responsibility of the Local Exchange
Company and the other entity to negotiate and arrange for any appropriate
adjustments.
IV. COMPLIANCE
Unless expressly authorized in writing by the Local Exchange Company, all
billing number information provided pursuant to this Agreement shall be used for
no purposes other than those set forth in this Agreement.
V. TERMS
This Agreement will be effective as of ___________, 1997, and will continue
in effect for one year, and thereafter may be continued until terminated by
either Party upon thirty (30) days' written notice to the other Party.
VI. FEES FOR SERVICE AND TAXES
6.01. The Local Exchange Company will not be charged a fee for storage
services provided by BST to the Local Exchange Company, as described in Section
I of this Agreement.
6.02. Sales, use and all other taxes (excluding taxes on BST's income)
determined by BST or any taxing authority to be due to any federal, state or
local taxing jurisdiction with respect to the provision of the service set forth
herein will be paid by the Local Exchange Company. The Local Exchange Company
shall have the right to have BST contest with the imposing jurisdiction, the
Local Exchange Company's expense, any such taxes that the Local Exchange Company
deems are improperly levied.
VII. INDEMNIFICATION
To the extent not prohibited by law, each Party will indemnify the other
and hold the other 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
4
<PAGE>
indemnifying Party's provision of services, provided, however, that any
indemnity for any loss, cost, claim, injury or liability arising out of or
relating to errors or omissions in the provision of services under this
Agreement shall be limited as otherwise specified in 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 promptly, in writing, of any
written claims, lawsuits, or demands for which the other Party is responsible
under this Section and to cooperate in every reasonable way to facilitate
defense or settlement of claims. The indemnifying Party shall not be liable
under this Section for settlement by the indemnified Party of any claim,
lawsuits, or demand unless the defense of the claim, lawsuit, or demand has been
tendered to in writing and the indemnifying Party has unreasonably failed to
assume such defense.
VIII. LIMITATION OF LIABILITY
Neither Party shall be liable to the other Party for any lost profits or
revenues or for any indirect, incidental or consequential damages incurred by
the other Party arising from this Agreement or the services formed or not
performed hereunder, regardless of the cause of such loss or damage.
IX. MISCELLANEOUS
9.01. It is understood and agreed to by the parties that BST may provide
similar services to other companies.
9.02. All terms, conditions and operations under this Agreement shall be
performed in accordance with, and subject to, all applicable local, state or
federal legal and regulatory tariffs, rulings, and other requirements of the
federal courts, the U.S. Department of Justice and state and federal regulatory
agencies. Nothing in this Agreement shall be construed to cause either Party to
violate any such legal or regulatory requirement and either Party's obligation
to perform shall be subject to all such requirements.
9.03. The Local Exchange Company agrees to submit to BST all advertising,
sales promotion, press releases, and other publicity matters relating to this
Agreement wherein BST's corporate or trade names, logos, trademarks or service
mark or those of BST's affiliated companies are mentioned or language from which
the connection of said names or trademarks therewith may be inferred or implied;
and the Local Exchange Company further agrees not to publish or use advertising,
sales promotions, press releases, or publicity matters related to BST without
BST's prior written approval.
9.04. This Agreement constitutes the entire agreement between the Local
Exchange Company and BST which supersedes all prior agreements or contracts,
oral or written representations, statements, negotiations, understandings,
proposals and understandings with respect to the subject matter hereof.
5
<PAGE>
9.05. Except as expressly provided in this Agreement, if any part of this
Agreement is held or construed to be invalid or unenforceable, the validity of
any other Section of this Agreement shall remain in full force and effect to the
extent permissible or appropriate in furtherance of the intent of this
Agreement.
9.06. Neither Party shall be held liable for any delay or failure in
performance of any part of this Agreement for 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,
power blackouts, volcanic action, other major environmental disturbances,
unusually severe weather conditions, inability to secure products or services of
other persons or transportation facilities, or acts or omissions of
transportation common carriers.
9.07. This Agreement shall be deemed to be a contract made under the laws
of the State of Georgia, and the construction, interpretation and performance of
this Agreement and all transactions hereunder shall be governed by the domestic
law of such State.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their fully authorized officers.
BELLSOUTH TELECOMMUNICATIONS, INC.
By: _
Title: _
Date: _
Address: _
SPRINT METROPOLITAN NETWORKS, INC.
By: _
Title: _
Date: _
Address: _
6
<PAGE>
ATTACHMENT C-7
Unbundled Products and Services and New Services
Service: Line Information Database Access Service (LIDB) - Validation
Description: Provides a customer the ability to receive validation of billing
information through query of data stored in BellSouth's LIDB data
base. See below for additional information.
State(s): All
<TABLE>
<CAPTION>
===============================================================================
Rate Elements Description Monthly Non-
Recurring
===============================================================================
<S> <C> <C> <C>
LIDB Common Transport Provides for transport of the $0.00030 -
customer's query from the LIDB
Location (RSTP) to the data
base (SCP). This charge will
apply each time the customer
requests and receives valida-
tion of a BellSouth calling
card or requests and receives
the status of a billed number
associated with a LEC line
stored in the BellSouth LIDB.
- -------------------------------------------------------------------------------
LIDB Validation Provides for query of data $0.03800 -
resident in BellSouth's LIDB.
This rate will apply each time
a customer requests and
receives validation of LEC
calling card or requests and
receives the status of a
billed number associated with
a LEC line stored in BellSouth's
LIDB.
- -------------------------------------------------------------------------------
Originating Point Code Provides for the establishment - $91.00
Establishment or Change or change of a customer
requested Originating Point
Code. This charge will apply each
time the customer establishes or
changes a point code destination
identifying one of his locations
or a location of one of his end
users.
- -------------------------------------------------------------------------------
CCS7 Signaling Connections Rates, terms and conditions for
CCS7 Signaling Connections are
as set forth in Section E6.8 of
BellSouth Telecommunication's
Inc.'s Intrastate Access
Services Tariff.
===============================================================================
</TABLE>
<PAGE>
ATTACHMENT C-8
Unbundled Products and Services and New Services
Service: Subscriber Listing Information
Description: Subscriber primary listing information provided at no charge and
in an acceptable format will be published at no charge as
standard directory listings in an alphabetical directory
published by or for BellSouth at no charge to each DeltaCom end
user customer.
States(s): All
Rate(s): (1) No charge for DeltaCom customer primary listings.
(2) Additional listings and optional listings may be provided by
BellSouth at rates set forth in BellSouth's intrastate
General Subscriber Services Tariffs.
Special
Requirements: DeltaCom agrees to execute a directory listing agreement with
BAPCO in a form consistent in all material respects with the
sample listing agreement attached hereto.
<PAGE>
ATTACHMENT C-9
Unbundled Products and Services and New Services
Service: Access to 911 Service
Description: Provides a universal, easy-to-remember number which is recognized
nationally as the appropriate number to call in an emergency.
Additionally, DeltaCom must provide a minimum of two dedicated
trunk groups originating from DeltaCom's serving wire center and
terminating to the appropriate 911 tandem. These facilities,
consisting of a Switched Local Channel from DeltaCom's point of
interface to its serving wire center and Switched Dedicated
Transport to the 911 tandem, may be purchased from BellSouth at
the Switched Dedicated Transport rates set forth in Section E6 of
BellSouth Telecommunications Inc.'s Intrastate Access Service
Tariffs.
State(s): All
Rate(s): Will be billed to appropriate municipality.
Special Service Requirements:
1. BellSouth shall provide interconnection to a 911 selective routing
switch to route calls from DeltaCom network to correct the Public
Safety Answering Point (PSAP).
2. BellSouth shall identify any special default arrangements and
routing arrangements to complete overflow.
3. BellSouth shall specify any requirements for emergency backup
numbers in case of massive trunk failures.
4. BellSouth shall provide priority restoral of trunk or network
outages on the same terms/conditions it provides itself (and
without the imposition of TSP).
5. The Parties agree to develop a mutual aid agreement to assist with
disaster recovery.
6. BellSouth shall implement a process to identify and correct errors
to the ALI database to ensure that the accuracy of data stored by
new entrants is no less than its own data.
7. BellSouth shall provide reasonable advance notification of any
pending tandem moves, and scheduled maintenance outages which
could affect the provision of 911 service.
<PAGE>
8. BellSouth shall establish a process for the management of NPA
splits as well as NXX splits sufficient to ensure that the
provision of 911 services to DeltaCom is not adversely affected.
<PAGE>
ATTACHMENT C-10
Unbundled Products and Services and New Services
Service: Operator Call Processing Access Service
Description: Provides Operator and Automated call handling. This includes
processing and verification of alternate billing information
for collect, calling card, and billing to a third number.
Operator Call Processing Access Service also provides dialing
instructions, and other operator assistance the customer may
desire.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Monthly Applied
Rate Elements State(s) Recurring Per
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operator Provided Call Handling All Per Work Minute
- -------------------------------------------------------------------------------------------------------
Call Completion Access Termination Charge Alabama $0.06 Per Call Attempt
This charge will be applicable per call Florida $0.06 Per Call Attempt
attempt and is in addition to the Georgia $0.06 Per Call Attempt
Operator Provided Call Handling Kentucky $0.06 Per Call Attempt
charge listed above. Louisiana $0.06 Per Call Attempt
Mississippi $0.06 Per Call Attempt
N. Carolina $0.06 Per Call Attempt
S. Carolina $0.06 Per Call Attempt
Tennessee $0.12 Per Call Attempt
- -------------------------------------------------------------------------------------------------------
Fully Automated Call Handling All $0.15 Per Attempt
- -------------------------------------------------------------------------------------------------------
Operator Services Transport
Operator Services transport rates, terms and conditions are as set forth in E6 of BellSouth
Telecommunication's, Inc.'s Intrastate Access Service Tariff.
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ATTACHMENT C-11
Unbundled Products and Services and New Services
Service: Directory Assistance Access Service (Number Services)
Description: In order to provide customers of the co-carriers access to
ubiquitous directory assistance services, whereby they can
gain information on all assigned numbers regardless of the
exchange service provider, methods and procedures need to be
developed to 1) incorporate BellSouth and DeltaCom customer
data into each other's directory assistance databases; 2)
provide access to each other database(s) for their customers;
3) to buy and sell companies of each others directory
assistance and use.
State(s): All.
Rate(s):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Monthly
Rate Elements Description State(s) Rate
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Directory Assistance Call Given a listed telephone number at the request of an Access All $0.25
Completion Access Service subscriber's end user, BellSouth will provide or attempt to
provide from the DA Operator System, call completion to the
number requested. This charge will be applied per completed
call.
- --------------------------------------------------------------------------------------------------------------------------------
Call Completion Access This charge will be applicable per completed call and is in Alabama $0.06
Termination Charge addition to the DACC Access Service charge listed above. Florida $0.06
Georgia $0.06
Kentucky $0.06
Louisiana $0.06
Mississippi $0.06
N. Carolina $0.08
S. Carolina $0.08
Tennessee $0.12
- --------------------------------------------------------------------------------------------------------------------------------
Number Services Intercept Number Services Intercept Access refers calls from discon- All $0.30
Access Service nected numbers to the proper number or numbers. This charge
will be applied per intercept query.
- --------------------------------------------------------------------------------------------------------------------------------
Directory Assistance Service Call Rates, terms and conditions will be applied as set forth in
E9.1.7 for Georgia and as set forth in E9.5.3 for AL, FL, KY,
LA, MS, NC, SC, TN of BellSouth Telecommunication's Inc.'s
Intrastate Access Service Tariff.
- --------------------------------------------------------------------------------------------------------------------------------
Directory Transport Rates, terms and conditions will be applied as set forth in
E9.1.7 for Georgia and as set forth in E9.5.3 for AL, FL, KY,
LA, MS, NC, SC, TN of BellSouth Telecommunication's, Inc.'s
Intrastate Access Service Tariff.
- --------------------------------------------------------------------------------------------------------------------------------
Directory Assistance Rates, terms and conditions will be applied as set forth in
Interconnection E9.1.7 for Georgia and as set forth in E9.5.3 for AL, FL, KY,
LA, MS, NC, SC, TN of BellSouth Telecommunication's Inc.'s
Intrastate Access Service Tariff.
- --------------------------------------------------------------------------------------------------------------------------------
Directory Assistance Database Rates, terms and conditions will be applied as set forth in
Service A38.1 of BellSouth Telecommunciation's Inc.'s General Sub-
scriber Service Tariff.
- --------------------------------------------------------------------------------------------------------------------------------
Direct Access to DA Service Rates, terms and conditions will be applied as set forth in
Section 9.3 of BellSouth Telecommunication's Inc.'s Inter-
state Access Service Tariff F.C.C. No. 1.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ATTACHMENT C-11 (cont'd)
Special Service Requirements:
1. DA Service hereunder provides the ability to make DeltaCom's data
available to anyone calling BellSouth's DA, and BellSouth's data
available to anyone calling DeltaCom's DA.
2. BellSouth shall store proprietary customer information provided by
DeltaCom in its AA database; such information shall be able to be
identified by source provider in order to provide the necessary
protection of proprietary information.
3. DA Service includes the ability to complete intraLATA, 555 and 411
calls utilizing components of BellSouth's DA network.
4. DeltaCom may resell BellSouth DA either as part of a bundled
DeltaCom service or independently.
5. DeltaCom shall be able to buy the components or any combination of
components, that comprise the DA Service and package them as
required, including:
. Unbundled Directory Platform (includes operators, switch and
LAN)
. Unbundled Directory Assistance Database Access Service
("DADAS")
. Unbundled Directory Assistance Database Service ("DADS")
DADAS and DADS will be offered pursuant to the terms of the
applicable BellSouth Local Interconnection Services Tariff.
6. There will be no charge for BellSouth storage of DeltaCom customer
information in the Directory Assistance Database.
7. The end-to-end interval for updating database must be the same as
provided to BellSouth's end users.
8. BellSouth will provide DeltaCom with an interface into BellSouth's
database for updating and inquiries.
9. Quality standards shall be equivalent to that provided by
BellSouth to its own customers.
10. Speed-to-answer times will be equivalent to that provided by
BellSouth to its own customers.
<PAGE>
ATTACHMENT C-11 (cont'd)
Special Service Requirements (cont'd):
11. Dialing parity will be provided, including no unreasonable dialing
delays.
12. BellSouth will incorporate DeltaCom customer data in its DA
database via the ordering process specified in its Facilities-
Based Ordering Guide ("FBOG").
13. BellSouth's DA database shall be updated and maintained with
DeltaCom data for customers who:
. Disconnect
. Change carrier
. Install
. "Change" orders
. Are Non-Published
. Are Non-Listed
. Are Non-Published/Non-Listed
14. Each carrier shall bill its own end-users.
15. BellSouth invoices to DeltaCom for DA Services shall be in a CABS
format.
16. The Parties agree to develop reasonable intercompany procedures to
correct errors which are identified in the DA database.
<PAGE>
ATTACHMENT C-12
Unbundled Products and Services and New Services
Service: Centralized Message Distribution System-Hosting (CMDS-Hosting)
Description: CMDS - Hosting is the Bellcore administered national system
used to exchange Message Record (EMR) formatted message data
among host companies.
All intraLATA and local messages originated and billed in the
BellSouth Region involving BellSouth CMDS hosted companies
will be processed through the Non-Send Paid Report System
(NSPRS) described in the attached agreement and Attachment C-
13 hereto. BellSouth agrees to provide CMDS/RAO hosting and
NSPRS services for DeltaCom, subject to the terms of this
Attachment and Attachment C-14, and subject to execution of a
services agreement substantially in the form attached hereto.
State(s): All
<TABLE>
<CAPTION>
=========================================================================================
Rate Elements Description Monthly
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Message Distribution Message Distribution is routing determination and $0.004
subsequent delivery of message data from one
company to another. Also included is the interface
function with CMDS, where appropriate. This charge
is applied on a per message basis.
- -----------------------------------------------------------------------------------------
Data Transmission This charge is applied on a per message basis. $0.001
=========================================================================================
</TABLE>
<PAGE>
CONTRACT PROVISIONS FOR RAO HOSTING AND NSPRS
SECTION 1. SCOPE OF AGREEMENT
1.01 This Agreement shall apply to the services of Revenue Accounting Office
(RAO) Hosting and the Non-Sent Paid Report System (NSPRS) as provided by
BellSouth to DeltaCom. The terms and conditions for the provisions of
these services are outlined in the Exhibits to this Agreement.
SECTION 2. DEFINITIONS
2.01 A. Centralized Message Distribution System is the BellCore administered
---------------------------------------
national system, based in Kansas City, Missouri, used to exchange
Message Record (EMR) formatted data among host companies.
B. Compensation is the amount of money due from BellSouth to DeltaCom or
------------
from DeltaCom to BellSouth for services and/or facilities provided
under this Agreement.
C. Exchange Message Record is the nationally administered standard
-----------------------
format for the exchange of data among Exchange Carriers within the
telecommunications industry.
D. Intercompany Settlements (ICS) is the revenue associated with charges
------------------------------
billed by a company other than the company in whose service are such
charges were incurred. ICS on a national level includes third number
and credit card calls. ICS within the BellSouth region includes third
number, credit card and collect calls.
E. Message Distribution is routing determination and subsequent delivery
--------------------
of message data from one company to another. Also included is the
interface function with CMDS, where appropriate.
F. Non-Sent Paid Report System (NSPRS) is the system that calculates ICS
-----------------------------------
amounts due from one company to another in the state of Florida.
G. Revenue Accounting Office (RAO) Status Company is a local exchange
----------------------------------------------
company/alternate local exchange company that has been assigned a
unique RAO code. Message data exchanged among RAO status companies is
grouped (i.e., packed) according to From/To/Bill RAO combinations.
SECTION 3. RESPONSIBILITIES OF THE PARTIES
3.01 RAO Hosting and NSPRS services provided to DeltaCom by BellSouth will be
in accordance with the methods and practices regularly adopted and applied
by BellSouth to its own operations during the term of this Agreement,
including such revisions as may be made from time to time by BellSouth.
<PAGE>
3.02 DeltaCom shall furnish all relevant information required by BellSouth for
the provision of RAO Hosting and NSPRS.
SECTION 4. COMPENSATION ARRANGEMENTS
4.01 Applicable compensation amounts will be billed by BellSouth to DeltaCom on
a monthly basis in arrears. Amounts due from one Party to the other
(excluding adjustments) are payable within thirty (30) days of receipt of
the billing statement.
SECTION 5. ASSOCIATED EXHIBITS
5.01 Listed below are the exhibits associated with this Agreement.
Exhibit A Message Distribution Service (RAO Hosting)
Exhibit B Intercompany Settlements (NSPRS)
5.02 From time to time by written agreement of the parties, new Exhibits may be
substituted for the attached Exhibits, superseding and canceling the
Exhibits then in effect.
SECTION 6. TERM OF AGREEMENT
6.01 This agreement is effective _________ and will continue in force until
terminated, with or without cause, by thirty (30) days' prior notice in
writing from either Party to the other. This Agreement may be amended from
time to time upon written agreement of the parties.
Executed this ______ day of ___________, 1997.
WITNESS: SPRINT METROPOLITAN NETWORK, INC.
- ------------------------ ---------------------------------
(title)
WITNESS: BELLSOUTH TELECOMMUNICATIONS, INC.
-2-
<PAGE>
Exhibit A
SECTION 1. SCOPE OF EXHIBIT
1.01 This exhibit specifies the terms and conditions, including compensation,
under which BellSouth shall provide message distribution service to
DeltaCom. As described herein, message distribution service includes the
following:
1) Message Forwarding to Intraregion LEC/ALEC - function of receiving an
ALEC message and forwarding the message to another LEC/ALEC in the
BellSouth region.
2) Message Forwarding to CMDS - function of receiving an ALEC message
and forwarding that message on to CMDS.
3) Message Forwarding from CMDS - function of receiving a message from
CMDS and forwarding that message to DeltaCom.
SECTION 2. RESPONSIBILITIES OF THE PARTIES
2.01 An ALEC that is CMDS hosted by BellSouth must have its own unique RAO
code. Requests for establishment of RAO status where BellSouth is the
selected CMDS interfacing host, require written notification from DeltaCom
to BellSouth at least six (6) weeks prior to the proposed effective date.
The proposed effective date will be mutually agreed upon between the
parties with consideration given to time necessary for the completion of
required BellCore functions. BellSouth will request the assignment of an
RAO code from its connecting contractor, currently BellCore, on behalf of
DeltaCom and will coordinate all associated conversion activities.
2.02 BellSouth will receive messages from DeltaCom that are to be processed by
BellSouth, another LEC/ALEC in the BellSouth region or a LEC outside the
BellSouth region.
2.03 BellSouth will perform invoice sequence checking, standard EMR format
editing, and balancing of message data with the EMR trailer record counts
on all data received from DeltaCom.
2.04 All data received from DeltaCom that is to be processed or billed by
another LEC/ALEC within the BellSouth region will be distributed to that
LEC/ALEC in accordance with the agreement(s) which may be in effect
between BellSouth and the involved LEC/ALEC.
<PAGE>
2.05 All data received from DeltaCom that is to be placed on the CMDS network
for distribution outside the BellSouth region will be handled in
accordance with the agreement(s) which may be in effect between BellSouth
and its connecting contractor (currently BellCore).
2.06 BellSouth will receive messages from the CMDS network that are destined to
be processed by DeltaCom and will forward them to DeltaCom on a daily
basis.
2.07 Transmission of message data between BellSouth and DeltaCom will be via
electronic data transmission.
2.08 All messages and related data exchanged between BellSouth and DeltaCom
will be formatted in accordance with accepted industry standards for EMR
formatted records and packed between appropriate EMR header and trailer
records, also in accordance with accepted industry standards.
2.09 DeltaCom will ensure that the recorded message detail necessary to
recreate files provided to BellSouth will be maintained for back-up
purposes for a period of three (3) calendar months beyond the related
message dates.
2.10 Should it become necessary for DeltaCom to send data to BellSouth more
than sixty (60) days past the message date(s), that ALEC will notify
BellSouth in advance of the transmission of the data. If there will be
impacts outside the BellSouth region, BellSouth will work with its
connecting contractor and DeltaCom to notify all affected parties.
2.11 In the event that data to be exchanged between the two parties should
become lost or destroyed, both parties will work together to determine the
source of the problem. Once the cause of the problem has been jointly
determined and the responsible Party (BellSouth or DeltaCom) identified
and agreed to, the company responsible for creating the data (BellSouth or
DeltaCom) will make every effort to have the affected data restored and
retransmitted. If the data cannot be retrieved, the responsible Party will
be liable to the other Party for any resulting lost revenue. Lost revenue
may be a combination of revenues that could not be billed to the end users
and associated access revenues. Both parties will work together to
estimate the revenue amount based upon historical data through a method
mutually agreed upon. The resulting estimated revenue loss will be paid by
the responsible Party to the other Party within three (3) calendar months
of the date of problem resolution, or as mutually agreed upon by the
parties.
-2-
<PAGE>
2.12 Should an error be detected by the EMR format edits performed by BellSouth
on data received from DeltaCom, the entire pack containing the affected
data will not be processed by BellSouth. BellSouth will notify DeltaCom of
the error condition. DeltaCom will correct the error(s) and will resend
the entire pack to BellSouth for processing. In the event that an out-of-
sequence condition occurs on subsequent packs, DeltaCom will resend these
packs to BellSouth after the pack containing the error has been
successfully reprocessed by BellSouth.
2.13 In association with message distribution service, BellSouth will provide
DeltaCom with associated intercompany settlements reports (national and
regional) as appropriate.
2.14 In no case shall either Party be liable to the other for any direct or
consequential damages incurred as a result of the obligations set out in
this agreement.
SECTION 3. COMPENSATION
3.01 For message distribution service provided by BellSouth for DeltaCom,
BellSouth shall receive the following as compensation:
Rate Per Message $0.004
3.02 For data transmission associated with message distribution service,
BellSouth shall receive the following as compensation:
Rate Per Message $0.001
3.03 Data circuits (private line or dial-up) will be required between BellSouth
and DeltaCom for the purpose of data transmission. Where a dedicated line
is required, DeltaCom will be responsible for ordering the circuit,
overseeing its installation and coordinating the installation with
BellSouth. DeltaCom will also be responsible for any charges associated
with this line. Equipment required on the BellSouth end to attach the line
to the mainframe computer and to transmit successfully ongoing will be
negotiated on a case by case basis. Where a dial-up facility is required,
dial circuits will be installed in the BellSouth data center by BellSouth
and the associated charges assessed to DeltaCom. Additionally, all message
toll charges associated with the use of the dial circuit by DeltaCom will
be the responsibility of DeltaCom. Associated equipment on the BellSouth
end, including a modem, will be negotiated on a case by case basis between
the parties.
-3-
<PAGE>
3.04 All equipment, including modems and software, that is required on DeltaCom
end for the purpose of data transmission will be the responsibility of
DeltaCom.
-4-
<PAGE>
Exhibit B
SECTION 1. SCOPE OF EXHIBIT
1.01 This Exhibit specifies the terms and conditions, including compensation,
under which BellSouth and DeltaCom will compensate each other for
Intercompany Settlements (ICS) messages.
SECTION 2. RESPONSIBILITIES OF THE PARTIES
2.01 BellSouth will remit to DeltaCom the revenue, less a billing charge, for
IntraLATA ICS messages, Local ICS messages, and charges for other services
when related messages and/or services are provided by DeltaCom and billed
to:
1) a BellSouth customer,
2) another company within the BellSouth region (excluding Florida)
associated with the exchange of message data with BellSouth
(excluding CIID and 891 messages),
3) another company within the conterminous United States that utilizes
CMDS directly or indirectly and settles with BellSouth directly or
indirectly through the Credit Card and Third Number Settlement System
(CATS) administered by BellCore,
4) another company utilizing the non-conterminous RAO codes associated
with AT&T's Transport and Tracking Intercompany System settlements
with BellSouth.
2.02 These other services include, but are not limited to:
1) Maritime Mobile Radiotelephone Services radio link charges as set
forth in the FCC's Maritime Mobile Radiotelephone Services tariff.
2) Aviation Radiotelephone Service radio link charges as set forth in
the FCC's Aviation Radiotelephone Service tariff.
-5-
<PAGE>
3) Public Land Mobile Radiotelephone Transient-Unit Non-Toll Service
[changes] as approved by the authorized state regulatory commission
(or municipal regulatory authority).
4) Non-Toll Service Charges billed to a calling card or to a third
number as filed with and approved by the authorized state regulatory
commission (or municipal regulatory authority).
5) Directory Assistance Call Charges to a calling card or to a third
number as approved by the authorized regulatory commission.
2.03 DeltaCom will bill, collect and remit to BellSouth the charges for
intraLATA and/or local ICS messages and other services as described above
where such messages and/or services are provided by:
1) BellSouth,
2) another company with the BellSouth region (excluding Florida)
associated with the exchange of message data with BellSouth
(excluding CIID and 891 messages),
3) another company within the conterminous United States that utilizes
CMDS directly or indirectly and settles with BellSouth directly or
indirectly through the Credit Card and Third Number Settlement System
(CATS).
2.04 For ICS revenues involving DeltaCom and other non-BellSouth LECs/ALECs
within the state, BellSouth will provide DeltaCom with monthly reports
summarizing the ICS revenues for messages that originated with DeltaCom
and were billed by each of the other Florida LECs/ALECs and those messages
that originated with each of the other Florida LECs/ALECs and were billed
by DeltaCom.
SECTION 3. COMPENSATION
3.01 The following compensation shall be retained by the billing company for
the billing of ICS messages and services:
Rate Per Message
----------------
1) Calls originated and billed in Florida or originated
and billed in North Carolina $0.0666
2) Calls originated in any of the states within BellSouth
-6-
<PAGE>
region and billed in that same state $0.05
3) Calls originated in a state within BellSouth's
region and billed in another state or originated
in another state and billed in a state within
BellSouth's region $0.05
4) Calls originated in a state within BellSouth's
region and billed outside the conterminous
United States $0.16
-7-
<PAGE>
ATTACHMENT C-13
Unbundled Products and Services and New Services
Service: Non-Sent Paid Report System (NSPRS)
Description: NSPRS includes: (1) a mechanized report system that provides to
the BellSouth CMDS hosted companies within the BellSouth Region
information regarding Non-Sent Paid message and revenue occurring
on calls originated and billed within the BellSouth region; (2)
distribution of Bellcore produced Credit Card and Third Number
System (CATS) reports and administration of associated elements;
(3) distribution of Bellcore produced non-conterminous CATS
reports and administration of associated settlements. Subject to
the terms hereof and execution of a services agreement
substantially in the form attached to Attachment C-12, BellSouth
agrees to provide NSPRS services for DeltaCom.
State(s): All
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Billing and Collections Applied
Rate Elements Fee Retained by Billing Per
Co.
- -------------------------------------------------------------------------------
<S> <C> <C>
NSPRS intrastate FL and NC $0.066 message
1X
- -------------------------------------------------------------------------------
NSPRS intrastate all other $0.05 message
BellSouth states
- -------------------------------------------------------------------------------
NSPRS CATS $0.05 message
- -------------------------------------------------------------------------------
NSPRS non-conterminous $0.16 message
- -------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
ATTACHMENT D
SERVICE PROVIDER NUMBER PORTABILITY-REMOTE (RCF)
INTERIM COSTS
<TABLE>
<CAPTION>
Monthly Nonrecurring
Rate Charge
------- ------------
<S> <C> <C>
Per Number Ported
- Resident/6 paths $1.15 --
- Business/10 paths $2.25 --
Each Additional Path $0.50 --
Per Order,
per end user location -- None
</TABLE>
<PAGE>
ATTACHMENT E
Service: Service Provider Number Portability - Direct Inward Dialed (DID)*
Description: Service Provider Number Portability (SPNP) is an interim service
arrangement provided by BellSouth to ALECs where by an end user,
who switches subscription to local exchange service from
BellSouth to an ALEC is permitted to retain use of the existing
BellSouth assigned telephone number provided that the end user
remains at the same location.
SPNP-DID provides trunk side access to BellSouth end office
switched for direct inward dialing to ALEC premises from the
telecommunications network directly to lines associated with ALEC
switching equipment.
<TABLE>
<CAPTION>
Interim Rates:
State(s) Alabama Florida
==================================================================================================================================
Monthly Applied Non- Applied Monthly Applied Non- Applied
Rate Elements Recurring For Recurring For Recurring Per Recurring For
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Number Ported-Business $0.01 each $1.00 each $0.01 each $1.00 each
Per Number Ported-Residence $0.01 each $1.00 each $0.01 each $1.00 each
Per Order -- -- $25.00 end user -- -- $25.00 end user
-- -- -- location -- -- -- location
SPNP-DID Trunk Termination $13.00 trunk $160.00 trunk-init. $15.00 trunk $170.00 trunk-init.
$80.00 trunk-sub $86.00 trunk-sub
DS1 Local Channel** $133.81 LC $866.97 LC-First $133.81 LC $866.97 LC-First
-- -- $486.83 LC-Add'l -- -- $486.83 LC-Add'l
DS1 Dedicated Transport** $23.50 per mile -- -- $16.75 per mile -- --
$90.00 fac. term. $100.49 fac. term. $59.75 fac. term. $100.49 fac. term.
==================================================================================================================================
</TABLE>
* Rates are displayed at the DS1-1.544 Mbps level. For rates and charges
applicable to other arrangement levels refer to Section E6 of BellSouth
Telecommunications, Inc.'s Intrastate Access Tariff.
** May not be required if the CLEC is collocated at the ported number end
office.
<PAGE>
ATTACHMENT E (cont'd)
<TABLE>
<CAPTION>
State(s) Georgia Kentucky
====================================================================================================================================
Monthly Applied Non- Applied Monthly Applied Non- Applied
Rate Elements Recurring For Recurring For Recurring Per Recurring For
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Number Ported-Business $0.01 each $1.00 each $0.01 each $1.00 each
Per Number Ported-Residence $0.01 each $1.00 each $0.01 each $1.00 each
Per Order -- -- $25.00 end user -- -- $25.00 end user
-- -- -- location -- -- -- location
SPNP-DID Trunk Termination $14.00 trunk $165.00 trunk-init $13.00 trunk $150.00 trunk-init
$83.00 trunk-sub $80.00 trunk-sub
DS1 Local Channel $133.81 LC $866.97 LC-First $133.81 LC $866.97 LC-First
-- -- $486.83 LC-Add'l -- -- $486.83 LC-Add'l
DS1 Dedicated Transport $23.50 per mile -- -- $23.50 per mile -- --
$90.00 fac. term. $100.49 fac. term. $90.00 fac. term. $100.49 fac. term.
====================================================================================================================================
<CAPTION>
State(s) Louisiana Mississippi
====================================================================================================================================
Monthly Applied Non- Applied Monthly Applied Non- Applied
Rate Elements Recurring For Recurring For Recurring Per Recurring For
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Number Ported-Business $0.01 each $1.00 each $0.01 each $1.00 each
Per Number Ported-Residence $0.01 each $1.00 each $0.01 each $1.00 each
Per Order -- -- $25.00 end user -- -- $25.00 end user
-- -- -- location -- -- -- location
SPNP-DID Trunk Termination $13.00 trunk $170.00 trunk-init $13.00 trunk $150.00 trunk-init
$86.00 trunk-sub $80.00 trunk-sub
DS1 Local Channel $133.81 LC $866.97 LC-First $133.81 LC $866.97 LC-First
-- -- $486.83 LC-Add'l -- -- $486.83 LC-Add'l
DS1 Dedicated Transport $16.75 per mile -- -- $23.50 per mile -- --
$59.75 fac. term. $100.49 fac. term. $90.00 fac. term. $100.49 fac. term.
====================================================================================================================================
</TABLE>
<PAGE>
ATTACHMENT E (cont'd)
<TABLE>
<CAPTION>
State(s): North South
Carolina Carolina
====================================================================================================================================
Monthly Applied Non- Applied Monthly Applied Non- Applied
Rate Elements Recurring For Recurring For Recurring Per Recurring For
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Number Ported-Business $XXX each $XXX each $0.01 each $1.00 each
Per Number Ported-Residence $XXX each $XXX each $0.01 each $1.00 each
Per Order -- -- $XXX end user -- -- $25.00 end user
-- -- -- location -- -- -- location
SPNP-DID Trunk Termination $XXX trunk $XXX trunk-init. $13.00 trunk $164.00 trunk-init.
$XXX trunk-sub $81.00 trunk-sub.
DS1 Local Channel $XXX LC $XXX LC-First $133.81 LC $866.97 LC-First
-- -- $XXX LC-Add'l -- -- $486.83 LC-Add'l
DS1 Dedicated Transport $XXX per mile -- -- $23.50 per mile -- --
$XXX fac. term. $XXX fac. term. $90.00 fac. term $100.49 fac. term.
====================================================================================================================================
<CAPTION>
State(s): Tennessee
==================================================================================
Monthly Applied Non- Applied
Rate Elements Recurring For Recurring For
==================================================================================
<S> <C> <C> <C> <C>
Per Number Ported-Business $0.01 each $1.00 each
Per Number Ported-Residence $0.01 each $1.00 each
Per Order -- -- $25.00 end user
-- -- -- location
SPNP-DID Trunk Termination $13.00 trunk $164.00 trunk-init.
$83.00 trunk-sub.
DS1 Local Channel $133.81 LC $866.97 LC-First
-- -- $486.83 LC-Add'l
DS1 Dedicated Transport $23.50 per mile -- --
$90.00 fac. term. $100.49 fac. term.
==================================================================================
</TABLE>
<PAGE>
ATTACHMENT F
BLANKET AGENCY AGREEMENT LETTER
I am an official of American Communications Services, Inc. ("DeltaCom") and
am authorized to commit my company to the conditions stated herein:
1. DeltaCom will not submit any requests or inquiries for Resale or
Facility Based local service provisioning under Blanket Agency Agreement
procedures to BellSouth for which it does not have proper authorization from the
End User upon whose behalf service is offered.
2. DeltaCom will instruct its End Users to deal directly with DeltaCom on
all inquiries concerning the Local Service. This may include, but is not limited
to, billing, repair, directory listings, and number portability.
3. DeltaCom is authorized to release all information regarding the End
User's local service to BellSouth.
4. In the event that an End User successfully challenges action taken by
BellSouth as a result of the above mentioned service request, DeltaCom will
indemnify and hold harmless BellSouth for any reasonable damages or losses,
resulting from DeltaCom's preparation and submission of service requests for
which it did not have proper End User authorization.
5. In the event that an End User successfully challenges billing which
resulted from local service requests submitted to BellSouth by DeltaCom under
this Blanket Agency Agreement, then DeltaCom will indemnify and hold harmless
BellSouth for any reasonable damages, losses, and costs, if any, arising from
BellSouth provisioning and maintenance of the End User's local service due to
errors in the ordering of said service by DeltaCom.
6. In the event that an End User disputes actions taken by DeltaCom as a
result of a submission by DeltaCom of a service request for disconnection or
termination of a previously submitted local service request for which it did not
have proper End User authorization, then DeltaCom will indemnify and hold
harmless BellSouth for any reasonable damages, losses, and costs, if any,
resulting from said dispute.
7. This Agreement shall continue in effect unless cancelled by prior
written notice by DeltaCom or BellSouth thirty (30) days' prior to the effective
date of cancellation. Cancellation shall not release or limit any matters
occurring prior to the cancellation of this Blanket Agency Agreement.
- 16 -
<PAGE>
Exhibit 10.34
AMENDMENT
TO
INTERCONNECTION AGREEMENT BETWEEN
DELTACOM, INC. AND
BELLSOUTH TELECOMMUNICATIONS, INC.
Pursuant to this Agreement (the "Amendment"), DeltaCom and BellSouth
Telecommunications, Inc. ("BellSouth") hereinafter referred to collectively as
the "Parties" hereby agree to amend that certain 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, DeltaCom and BellSouth hereby covenant and agree as
follows:
1. The Parties agree that BellSouth will, upon request, provide and
DeltaCom will accept and pay for (1) loops, (2) loop cross-connections and (3)
loop channelization in accordance with the schedule of prices set forth in
Attachment C-2 to this Amendment which is incorporated herein by reference, in
and for the states reflected on Attachment C-2.
2. The Parties agree that the prices reflected herein shall be "trued-up"
(up or down) based on final prices either determined by further agreement or by
final order (including any appeals) of the relevant public service commission or
other body having jurisdiction over the subject matter of this Amendment, which
final order meets the criteria contained in paragraph 4 hereof. The "true-up"
will consist of comparing the actual volumes and demand for each item, together
with the price associated with such item by this Amendment, with the final
prices determined for each item. Each party shall keep its own records upon
which a "true-up" can be based and any final payment from one party to the other
shall be in an amount agreed upon by the Parties based on such records. In the
event of any disagreement as between the records or the Parties regarding the
amount of such "true-up," the Parties agree that the body having jurisdiction
over the matter for the affected states shall be called upon to resolve such
differences or that they will submit the matter to commercial arbitration in
accordance with the terms contained in Section XXV of the Interconnection
Agreement.
3. The Parties agree that they may continue to negotiate as appropriate in
an effort to obtain final prices for each of these items, but in the event that
no such agreement is reached within six (6) months of this Amendment (which time
can be extended by mutual agreement of the Parties) either party may petition
the public service commission or other regulatory body to resolve such disputes
and to determine final rates for each of the items covered by this Amendment.
Alternatively, upon their mutual agreement, the parties may submit the matter to
commercial arbitration in accordance with the terms contained in Article XIV of
the Interconnection Agreement.
<PAGE>
4. Any final order that forms the basis of a "true-up" under this
Amendment shall meet the following criteria:
(a) It shall be in a proceeding to which DeltaCom and BellSouth are
entitled to be full parties to the proceeding.
(b) It shall apply the provisions of the Telecommunications Act of
1996, including, but not limited to, Section 252(d)(l) and all effective
implementing rules and regulations; provided that said Act and such regulations
are in effect at the time of the final order.
(c) It shall include as an issue the geographic deaveraging of
unbundled element rates, which deaveraged rates, if any are required by said
final order, shall form the basis of any "true-up."
5. The Parties further agree that the rates for number portability
identified in Attachment D to the Interconnection Agreement will be
retroactively "trued-up" to the effective date of the Interconnection Agreement
in the event that different rates for number portability are established by
mutual agreement of the parties, regulatory action, judicial order, or by
selection of a lower rate for number portability pursuant to the "most favorable
provisions" contained in Section XXII of the Interconnection Agreement.
6. The Parties agree that all of the other provisions of the
Interconnection Agreement, dated March 12, 1997, shall remain in full force and
effect. Nothing in this Amendment shall in any way limit DeltaCom's ability to
select substitute rates for local loops, loop cross connects, or loop
channelization pursuant to the terms of Section XXII of the Interconnection
Agreement relating to "most favorable" treatment.
7. The Parties further agree that either or both of the Parties is
authorized to submit this Amendment to the appropriate state public service
commission or other regulatory body having jurisdiction over the subject matter
of this Amendment, for approval subject to Section 252(e) of the federal
Telecommunications Act of 1996.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be
executed by their respective duly authorized representatives on the date
indicated below.
/s/ Tom Mullis /s/ Jerry Hendrix
- -------------------------------- -------------------------------------
DELTACOM, INC. BELLSOUTH TELECOMMUNICATIONS, INC.
-2-
<PAGE>
By: Tom Mullis By: /s/ Jerry Hendrix
------------------------------- --------------------------------
Title: SR. VP Title: Director
---------------------------- -----------------------------
DATE: 3/12/97 DATE: 3/12/97
----------------------------- ------------------------------
-3-
<PAGE>
ATTACHMENT C-2
<TABLE>
<CAPTION>
States: Alabama Florida Georgia Kentucky
- ------------------------------------------------------------------------------------------------------------------------------------
Rate Elements Monthly Nonrecurring* Monthly Nonrecurring* Monthly Nonrecurring* Monthly Nonrecurring*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unbundled Exchange
Access Loop**
2-Wire Analog $18.00 $55.20 $17.00 $44.80 $17.00 $25.80 $17.00 $58.40
4-Wire Analog $28.80 $55.20 $27.20 $44.80 $27.20 $25.80 $27.20 $58.40
2-Wire ADSL/HDSL $18.00 $55.20 $17.00 $44.80 $17.00 $25.80 $17.00 $58.40
4-Wire HDSL $28.80 $55.20 $27.20 $44.80 $27.20 $25.80 $27.20 $58.40
2-Wire ISDN Digital $28.80 $55.20 $27.20 $44.80 $27.20 $25.00 $27.20 $58.40
Cross-Connects
2-Wire Analog $0.30 $18.40 $0.30 $15.20 $0.30 $12.60 $0.30 $16.00
4-Wire Analog $0.50 $18.40 $0.50 $15.20 $0.50 $12.60 $0.50 $16.00
Loop Channelization
Equipment $400.00 $525.00 $400.00 $525.00 $400.00 $525.00 $400.00 $525.00
Per Line $1.15 $8.00 $1.15 $8.00 $1.15 $8.00 $1.15 $8.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* These rates reflect 80% of the Business Service Connection Charge. If the
Business Service Connection Charge is modified, this rate will become 80% of
the revised rate.
** In the event that an unbundled loop ordered by DeltaCom is part of an
Integrated Digital Loop Carrier (IDLC) system, the loop will by unbundled
from the IDLC and provided to DeltaCom in accordance with the corresponding
rates specified above.
<PAGE>
ATTACHMENT C-2
<TABLE>
<CAPTION>
States: Louisiana Mississippi North Carolina South Carolina
- -----------------------------------------------------------------------------------------------------------------------------------
Rate Elements Monthly Nonrecurring* Monthly Nonrecurring* Monthly Nonrecurring* Monthly Nonrecurring*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unbundled Exchange
Access Loop**
2-Wire Analog $17.00 $68.00 $22.00 $53.36 $17.00 $33.00 $18.00 $51.20
4-Wire Analog $27.20 $68.00 $35.20 $53.36 $27.20 $33.00 $28.80 $51.20
2-Wire ADSL/HDSL $17.00 $68.00 $22.00 $53.36 $17.00 $33.00 $18.00 $51.20
4-Wire HDSL $27.20 $68.00 $35.20 $53.36 $27.20 $33.00 $28.80 $51.20
2-Wire ISDN Digital $27.20 $68.00 $35.20 $53.36 $27.20 $33.00 $28.80 $51.20
Cross-Connects
2-Wire Analog $0.30 $20.80 $0.30 $13.00 $0.30 $11.60 $0.30 $8.00
4-Wire Analog $0.50 $20.80 $0.50 $13.00 $0.50 $11.60 $0.50 $8.00
Loop Channelization
Equipment $400.00 $525.00 $400.00 $525.00 $400.00 $525.00 $400.00 $525.00
Per Line $1.15 $8.00 $1.15 $8.00 $1.15 $8.00 $1.15 $8.00
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* These rates reflect 80% of the Business Service Connection Charge. If the
Business Service Connection Charge is modified, this rate will become 80% of
the revised rate.
** In the event that an unbundled loop ordered by DeltaCom is part of an
Integrated Digital Loop Carrier (IDLC) system, the loop will by unbundled
from the IDLC and provided to DeltaCom in accordance with the corresponding
rates specified above.
<PAGE>
ATTACHMENT C-2
<TABLE>
<CAPTION>
States: Tennessee
- -----------------------------------------------------
Rate Elements Monthly Nonrecurring*
- -----------------------------------------------------
<S> <C> <C>
Unbundled Exchange
Access Loop**
2-Wire Analog $18.00 $46.80
4-Wire Analog $28.80 $46.80
2-Wire ADSL/HDSL $18.00 $46.80
4-Wire HDSL $28.80 $46.80
2-Wire ISDN Digital $28.80 $46.80
Cross-Connects
2-Wire Analog $0.30 $19.20
4-Wire Analog $0.50 $19.20
Loop Channelization
Equipment $400.00 $525.00
Per Line $1.15 $8.00
- -----------------------------------------------------
</TABLE>
* These rates reflect 80% of the Business Service Connection Charge. If the
Business Service Connection Charge is modified, this rate will become 80% of
the revised rate.
** In the event that an unbundled loop ordered by DeltaCom is part of an
Integrated Digital Loop Carrier (IDLC) system, the loop will by unbundled
from the IDLC and provided to DeltaCom in accordance with the corresponding
rates specified above.
<PAGE>
Exhibit 10.35
Amendment To The Interconnection Agreement Between BellSouth Telecommunications,
Inc. and DeltaCom, Inc. Regarding The Resale of BellSouth Services
PURSUANT TO THIS AMENDMENT ("the Amendment"), DeltaCom, Inc. ("DeltaCom") and
BellSouth Telecommunications, Inc. ("BellSouth") hereinafter referred to
collectively as the Parties hereby agree to amend the Interconnection Agreement
between the Parties dated March 12, 1997.
NOW, THEREFORE, for and in consideration of the mutual provisions contained
herein, BellSouth and DeltaCom do hereby agree as follows:
I. Term of the Agreement
A. The term of this Agreement shall be consistent with the term set forth
in Section XVII of the Interconnection Agreement.
B. The rates pursuant to which DeltaCom is to purchase services from
BellSouth for resale shall be at a discount rate off of the retail rate for
the telecommunications service. The discount rates shall be as set forth in
Exhibit A, attached hereto and incorporated herein by this reference.
II. Definition of Terms
A. CUSTOMER OF RECORD means the entity responsible for placing application
for service; requesting additions, rearrangements, maintenance or
discontinuance of service; payment in full of charges incurred such as
toll, directory assistance, etc.
B. DEPOSIT means assurance provided by a customer in the form of cash,
surety bond or bank letter of credit to be held by the Company.
C. END USER means the ultimate user of the telecommunications services.
D. END USER CUSTOMER LOCATION means the physical location of the premises
where an end user makes use of the telecommunications services.
E. NEW SERVICES means functions, features or capabilities that are not
currently offered by BellSouth. This includes packaging of existing services
or combining a new function, feature or capability with an existing service.
F. OTHER LOCAL EXCHANGE COMPANY (OLEC) means a telephone company
certificated by the public service commissions of the Company's franchised
area to provide local exchange service within the Company's franchised area.
G. RESALE means an activity wherein a certificated OLEC, such as DeltaCom
subscribes to the telecommunications services of the Company and then
reoffers those telecommunications services to the public (with or without
"adding value").
Page 1
<PAGE>
H. RESALE SERVICE AREA means the area, as defined in a public service
commission approved certificate of operation, within which an OLEC, such as
DeltaCom, may offer resold local exchange telecommunications service.
III. General Provisions
A. DeltaCom may resell the tariffed local exchange and toll
telecommunications services of BellSouth subject to the terms, and
conditions specifically set forth herein. Notwithstanding the foregoing,
the following are not available for purchase: Grandfathered services;
promotional and trial retail service offerings; lifeline and linkup
services; contract service arrangements; installment billing options; 911
and E911 services; interconnection services for mobile service
providers; legislatively or administratively mandated specialized discounts
(e.g., education institution discount) and discounted services to meet
competitive situation.
B. The provision of services by the Company to DeltaCom does not
constitute a joint undertaking for the furnishing of any service.
C. DeltaCom will be the customer of record for all services purchased from
BellSouth. Except as specified herein, the Company will take orders from,
bill and expect payment from DeltaCom for all services.
D. DeltaCom will be the Company's single point of contact for all services
purchased pursuant to this Agreement. The Company shall have no contact
with the end user except to the extent provided for herein.
E. The Company will continue to bill the end user for any services that
the end user specifies it wishes to receive directly from the Company.
F. The Company maintains the right to serve directly any end user within
the service area of DeltaCom. The Company will continue to directly market
its own telecommunications products and services and in doing so may
establish independent relationships with end users of DeltaCom.
G. DeltaCom shall not interfere with the right of any person or entity to
obtain service directly from the Company.
H. Although the telephone number of an end user may normally be retained
by the end user, telephone numbers are the property of the Company and are
assigned to the service furnished. DeltaCom has no property right to the
telephone number or any other call number designation associated with
services furnished by the Company, and no right to the continuance of
service through any particular central office. The Company reserves the
right to change such numbers, or the central office designation associated
with such numbers, or both, whenever the Company deems it necessary to do
so in the conduct of its business.
I. The Company may provide any service or facility for which a charge is
not established herein, as long as it is offered on the same terms to
DeltaCom.
J. Service is furnished subject to the condition that it will not be used
for any unlawful purpose.
Page 2
<PAGE>
K. Service will be discontinued if any law enforcement agency advises that
the service being used is in violation of the law.
L. The Company can refuse service when it has grounds to believe that
service will be used in violation of the law.
M. The Company accepts no responsibility to any person for any unlawful
act committed by DeltaCom or its end users as part of providing service to
DeltaCom for purposes of resale or otherwise.
N. The Company will cooperate fully with law enforcement agencies with
subpoenas and court orders for assistance with the Company's customers. Law
enforcement agency subpoenas and court orders regarding end users of
DeltaCom will be directed to DeltaCom. The Company will bill DeltaCom for
implementing any requests by law enforcement agencies regarding DeltaCom
end users.
O. The characteristics and methods of operation of any circuits,
facilities or equipment provided by other than the Company shall not:
1. Interfere with or impair service over any facilities of the
Company, its affiliates, or its connecting and concurring carriers
involved in its service;
2. Cause damage to their plant;
3. Impair the privacy of any communications; or
4. Create hazards to any employees or the public.
P. DeltaCom assumes the responsibility of notifying the Company regarding
less than standard operations with respect to services provided by it.
Q. Facilities and/or equipment utilized by BellSouth to provide service to
DeltaCom remain the property of BellSouth.
R. White page directory listings will be provided in accordance with
regulations set forth in Section A6 of the General Subscriber Service
Tariff and will be available for resale.
IV. BellSouth's Provision of Services to DeltaCom
A. DeltaCom agrees that its resale of BellSouth services shall be as
follows:
1. The resale of telecommunications services shall be limited to users
and uses conforming to the class of service restrictions.
2. To the extent DeltaCom is a telecommunications carrier that serves
greater than 5 percent of the Nation's presubscribed access lines,
DeltaCom shall not jointly market its interLATA services with the
telecommunications services purchased from BellSouth pursuant to this
Agreement in any of the states covered under this Agreement. For the
purposes of this
Page 3
<PAGE>
subsection, to jointly market means any advertisement, marketing effort
or billing in which the telecommunications services purchased from
BellSouth for purposes of resale to customers and interLATA services
offered by DeltaCom are packaged, tied, bundled, discounted or offered
together in any way to the end user. Such efforts include, but are not
limited to, sales referrals, resale arrangements, sales agencies or
billing agreements. This subsection shall be void and of no effect for
a particular state covered under this Agreement as of February 8, 1999
or on the date BellSouth is authorized to offer interLATA services in
that state, whichever is earlier.
3. Hotel and Hospital PBX service are the only telecommunications
services available for resale to Hotel/Motel and Hospital end users,
respectively. Similarly, Access Line Service for Customer Provided Coin
Telephones is the only local service available for resale to COCOTS
customers. Shared Tenant Service customers can only be sold those
telecommunications services available in the Company's A23 Shared
Tenant Service Tariff.
4. DeltaCom is prohibited from furnishing both flat and measured rate
service on the same business premises to the same subscribers (end
users) as stated in A2 of the Company's Tariff except for backup
service as indicated in the applicable state tariff Section A3.
5. If telephone service is established and it is subsequently
determined that the class of service restriction has been violated,
DeltaCom will be notified and billing for that service will be
immediately changed to the appropriate class of service. Service
charges for changes between class of service, back billing, and
interest as described in this subsection shall apply at the Company's
sole discretion. Interest at the rate of 0.000590 per day, compounded
daily for the number of days from the back billing date to and
including the date that DeltaCom actually makes the payment to the
Company may be assessed.
6. The Company reserves the right to periodically audit services
purchased by DeltaCom to establish authenticity of use. Such audit
shall not occur more than once in a calendar year. DeltaCom shall make
any and all records and data available to the Company or the Company's
auditor's on a reasonable basis. The Company shall bear the cost of
said audit.
B. Resold services can only be used in the same manner as specified in the
Company's Tariff. Resold services are subject to the same terms and
conditions as are specified for such services when furnished to an
individual end user of the Company in the appropriate section of the
Company's Tariffs. Specific tariff features, e.g. a usage allowance per
month, shall not be aggregated across multiple resold services. Resold
services cannot be used to aggregate traffic from more than one end user
customer except as specified in Section A23. of the Company's Tariff
referring to Shared Tenant Service.
C. DeltaCom may resell services only within the specific resale service
area as defined in its certificate.
D. Telephone numbers transmitted via any resold service feature are
intended solely for the use of the end user of the feature. Resale of this
information is prohibited.
E. No patent, copyright, trademark or other proprietary right is licensed,
granted or otherwise transferred by this Agreement. DeltaCom is strictly
prohibited from any use, including but not limited to sales, marketing or
advertising, of any BellSouth name or trademark.
V. Maintenance of Services
Page 4
<PAGE>
A. Services resold under the Company's Tariffs and facilities and
equipment provided by the Company shall be maintained by the Company.
B. DeltaCom or its end users may not rearrange, move, disconnect, remove
or attempt to repair any facilities owned by the Company, other than by
connection or disconnection to any interface means used, except with the
written consent of the Company.
C. DeltaCom accepts responsibility to notify the Company of situations
that arise that may result in a service problem.
D. DeltaCom will be the Company's single point of contact for all repair
calls on behalf of DeltaCom's end users.
E. DeltaCom will contact the appropriate repair centers in accordance with
procedures established by the Company.
F. For all repair requests, DeltaCom accepts responsibility for adhering
to the Company's prescreening guidelines prior to referring the trouble to
the Company.
G. The Company will bill DeltaCom for handling troubles that are found not
to be in the Company's network pursuant to its standard time and material
charges. The standard time and material charges will be no more than what
BellSouth charges to its retail customers for the same services.
H. The Company reserves the right to contact DeltaCom's customers, if
deemed necessary, for maintenance purposes.
VI. Establishment of Service
A. After receiving certification as a local exchange company from the
appropriate regulatory agency, DeltaCom will provide the appropriate
Company service center the necessary documentation to enable the Company to
establish a master account for DeltaCom. Such documentation shall include
the Application for Master Account, proof of authority to provide
telecommunications services, an Operating Company Number ("OCN") assigned
by the National Exchange Carriers Association ("NECA") and a tax exemption
certificate, if applicable. When necessary deposit requirements are met,
the Company will begin taking orders for the resale of service.
B. Service orders will be in a standard format designated by the Company.
C. When notification is received from DeltaCom that a current customer of
the Company will subscribe to DeltaCom's service, standard service order
intervals for the appropriate class of service will apply.
D. The Company will not require end user confirmation prior to
establishing service for DeltaCom's end user customer. DeltaCom must,
however, be able to demonstrate end user authorization upon request.
Page 5
<PAGE>
E. DeltaCom will be the single point of contact with the Company for all
subsequent ordering activity resulting in additions or changes to resold
services except that the Company will accept a request directly from the
end user for conversion of the end user's service from DeltaCom to the
Company or will accept a request from another OLEC for conversion of the
end user's service from the DeltaCom to the other LEC. The Company will
notify DeltaCom that such a request has been processed.
F. If the Company determines that an unauthorized change in local service
to DeltaCom has occurred, the Company will reestablish service with the
appropriate local service provider and will assess DeltaCom as the OLEC
initiating the unauthorized change, an unauthorized change charge similar
to that described in F.C.C. Tariff No. 1, Section 13.3.3. Appropriate
nonrecurring charges, as set forth in Section A4. of the General Subscriber
Service Tariff, will also be assessed to DeltaCom.
These charges can be adjusted if DeltaCom provides satisfactory proof of
authorization.
Nonrecurring Charge
(a) each Residence or Business line $19.41
G. The Company will, in order to safeguard its interest, require DeltaCom
to make a deposit to be held by the Company as a guarantee of the payment
of rates and charges, unless satisfactory credit has already been
established. Any such deposit may be held during the continuance of the
service as security for the payment of any and all amounts accruing for the
service.
H. Such deposit may not exceed two months' estimated billing.
I. The fact that a deposit has been made in no way relieves DeltaCom from
complying with the Company's regulations as to advance payments and the
prompt payment of bills on presentation nor does it constitute a waiver or
modification of the regular practices of the Company providing for the
discontinuance of service for non-payment of any sums due the Company.
J. The Company reserves the right to increase the deposit requirements
when, in its sole judgment, the conditions justify such action.
K. In the event that DeltaCom defaults on its account, service to DeltaCom
will be terminated and any deposits held will be applied to its account.
L. In the case of a cash deposit, interest at the rate of six percent per
annum shall be paid to DeltaCom during the continuance of the deposit.
Interest on a deposit shall accrue annually and, if requested, shall be
annually credited to DeltaCom by the accrual date.
VII. Payment And Billing Arrangements
A. When the initial service is ordered by DeltaCom, the Company will
establish an accounts receivable master account for DeltaCom.
B. The Company shall bill DeltaCom on a current basis all applicable
charges and credits.
Page 6
<PAGE>
C. Payment of all charges will be the responsibility of DeltaCom. DeltaCom
shall make payment to the Company for all services billed. The Company is not
responsible for payments not received by DeltaCom from DeltaCom's customer. The
Company will not become involved in billing disputes that may arise between
DeltaCom and its customer. Payments made to the Company as payment on account
will be credited to an accounts receivable master account and not to an end
user's account.
D. The Company will render bills each month on established bill days for each
of DeltaCom's accounts.
E. The Company will bill DeltaCom, in advance, charges for all services to be
provided during the ensuing billing period except charges associated with
service usage, which charges will be billed in arrears. Charges will be
calculated on an individual end user account level, including, if applicable,
any charges for usage or usage allowances. BellSouth will also bill all charges,
including but not limited to 911 and E911 charges, telecommunications relay
charges, and franchise fees, on an individual end user account level.
F. The payment will be due by the next bill date (i.e., same date in the
following month as the bill date) and is payable in immediately available
funds. Payment is considered to have been made when received by the Company.
If the payment due date falls on a Sunday or on a Holiday which is observed
on a Monday, the payment due date shall be the first non-Holiday day following
such Sunday or Holiday. If the payment due date falls on a Saturday or on a
Holiday which is observed on Tuesday, Wednesday, Thursday, or Friday, the
payment due date shall be the last non-Holiday day preceding such Saturday or
Holiday. If payment is not received by the payment due date, a late payment
penalty, as set forth in I. following, shall apply.
G. Upon proof of tax exempt certification from DeltaCom, the total amount
billed to DeltaCom will not include any taxes due from the end user. DeltaCom
will be solely responsible for the computation, tracking, reporting and payment
of all federal, state and/or local jurisdiction taxes associated with the
services resold to the end user.
H. As the customer of record, DeltaCom will be responsible for, and remit to
the Company, all charges applicable to its resold services for emergency
services (E911 and 911) and Telecommunications Relay Service (TRS) as well as
any other charges of a similar nature.
I. If any portion of the payment is received by the Company after the payment
due date as set forth preceding, or if any portion of the payment is received by
the Company in funds that are not immediately available to the Company, then a
late payment penalty shall be due to the Company. The late payment penalty shall
be the portion of the payment not received by the payment due date times a late
factor. The late factor shall be as set forth in Section A2 of the General
Subscriber Service Tariff and Section B2 of the Private Line Service Tariff.
J. Any switched access charges associated with interexchange carrier access to
the resold local exchange lines will be billed by, and due to, the Company. No
additional charges are to be assessed to DeltaCom.
K. The Company will not perform billing and collection services for DeltaCom as
a result of the execution of this Agreement. All requests for billing services
should be referred to the appropriate entity or operational group within the
Company.
Page 7
<PAGE>
L. Pursuant to 47 CFR Section 51.617, the Company will bill the charges
shown below which are identical to the EUCL rates billed by BST to its end
users.
<TABLE>
<CAPTION>
Monthly Rate
<S> <C>
1. Residential
(a) Each Individual Line or Trunk $3.50
2. Single Line Business
(b) Each Individual Line or Trunk $3.50
3. Multi-line Business
(c) Each Individual Line or Trunk $6.00
</TABLE>
M. In general, the Company will not become involved in disputes between
DeltaCom and DeltaCom's end user customers over resold services. If a
dispute does arise that cannot be settled without the involvement of the
Company, DeltaCom shall contact the designated Service Center for
resolution. The Company will make every effort to assist in the resolution
of the dispute and will work with DeltaCom to resolve the matter in as
timely a manner as possible. DeltaCom may be required to submit
documentation to substantiate the claim.
VIII. Discontinuance of Service
A. The procedures for discontinuing service to an end user are as
follows:
1. Where possible, the Company will deny service to DeltaCom's end
user on behalf of, and at the request of, DeltaCom. Upon restoration
of the end user's service, restoral charges will apply and will be the
responsibility of DeltaCom.
2. At the request of DeltaCom, the Company will disconnect a DeltaCom
end user customer.
3. All requests by DeltaCom for denial or disconnection of an end
user for nonpayment must be in writing.
4. DeltaCom will be made solely responsible for notifying the end
user of the proposed disconnection of the service.
5. The Company will continue to process calls made to the Annoyance
Call Center and will advise DeltaCom when it is determined that
annoyance calls are originated from one of their end user's locations.
The Company shall be indemnified, defended and held harmless by
DeltaCom and/or the end user against any claim, loss or damage arising
from providing this information to DeltaCom. It is the responsibility
of DeltaCom to take the corrective action necessary with its customers
who make annoying calls. Failure to do so will result in the Company's
disconnecting the end user's service.
B. The procedures for discontinuing service to DeltaCom are as follows:
1. The Company reserves the right to suspend or terminate service for
nonpayment or in the event of prohibited, unlawful or improper use of
the facilities or service, abuse of the facilities, or any
Page 8
<PAGE>
other violation or noncompliance by DeltaCom of the rules and
regulations of the Company's Tariffs.
2. If payment of account is not received by the bill day in the month
after the original bill day, the Company may provide written notice to
DeltaCom, that additional applications for service will be refused and
that any pending orders for service will not be completed if payment
is not received by the fifteenth day following the date of the notice.
If the Company does not refuse additional applications for service on
the date specified in the notice, and DeltaCom's noncompliance
continues, nothing contained herein shall preclude the Company's right
to refuse additional applications for service without further notice.
3. If payment of account is not received, or arrangements made, by
the bill day in the second consecutive month, the account will be
considered in default and will be subject to denial or disconnection,
or both.
4. If DeltaCom fails to comply with the provisions of this Agreement,
including any payments to be made by it on the dates and times herein
specified, the Company may, on thirty days written notice to the
person designated by DeltaCom to receive notices of noncompliance,
discontinue the provision of existing services to DeltaCom at any time
thereafter. In the case of such discontinuance, all billed charges, as
well as applicable termination charges, shall become due. If the
Company does not discontinue the provision of the services involved on
the date specified in the thirty days notice, and DeltaCom's
noncompliance continues, nothing contained herein shall preclude the
Company's right to discontinue the provision of the services to
DeltaCom without further notice.
5. If payment is not received or arrangements made for payment by the
date given in the written notification, DeltaCom's services will be
discontinued. Upon discontinuance of service on a DeltaCom's account,
service to DeltaCom's end users will be denied. The Company will also
reestablish service at the request of the end user or DeltaCom upon
payment of the appropriate connection fee and subject to the Company's
normal application procedures.
6. If within fifteen days after an end user's service has been denied
no contact has been made in reference to restoring service, the end
user's service will be disconnected.
IX. Resolution of Disputes
Except as otherwise stated in this Agreement, the parties agree that if any
dispute arises as to the interpretation of any provision of this Agreement or as
to the proper implementation of this Agreement, the parties will petition the
applicable state Public Service Commission for a resolution of the dispute.
However, each party reserves any rights it may have to seek judicial review of
any ruling made by that Public Service Commission concerning this Agreement.
X. Miscellaneous
A. The liability and indemnification obligations of the parties shall be
as set forth in Section XXI. of the Interconnection Agreement.
Page 9
<PAGE>
B. Issues regarding the treatment of proprietary and confidential
information will be governed pursuant to Section XXIV. of the Interconnection
Agreement.
C. The Parties agree that this Amendment shall not be proffered by either
party in another jurisdiction as evidence of any concession or as a waiver of
any position taken by the other party in that jurisdiction or for any other
purpose.
D. Any failure by either party to insist upon the strict performance by
the other party of any of the provisions of this Amendment shall not be deemed a
waiver of any of the provisions of this Amendment, and each party,
notwithstanding such failure, shall have the right thereafter to insist upon the
specific performance of any and all of the provisions of this Amendment.
E. This Amendment shall be governed by, and construed and enforced in
accordance with Section XXVII of the Interconnection Agreement.
F. This Amendment was executed after arm's length negotiations between the
undersigned Parties and reflects the conclusion of the undersigned that this
Amendment is in the best interests of all Parties.
G. Every notice, consent, approval, or other communications required or
contemplated by this Amendment shall be provided pursuant to Section XIX. of the
Interconnection Agreement.
H. More favorable resale arrangements may be available to DeltaCom
pursuant to Section XXII. of the Interconnection Agreement.
I. The Parties agree that all of the other provisions of the
Interconnection Agreement dated March 12, 1997 shall remain in full force and
effect and by this reference are incorporated herein.
L. The Parties agree that the execution of this Amendment and its
submission to the Commission is made without prejudice to the rights of either
party to challenge the Commission's decision regarding the resale of BellSouth
telecommunications service to new entrants. The Parties further agree to conform
this Amendment to any final nonappealable decision of the Commission regarding
resale.
XI. Amendments
This Agreement may be amended at any time upon written agreement of both
parties.
XII. Entire Agreement
This Agreement sets forth the entire understanding and supersedes prior
agreements between the parties relating to the subject matter contained herein
and merges all prior discussions between them, and neither party shall be bound
by any definition, condition, provision, representation, warranty, covenant or
promise other than as expressly stated in this Agreement or as is
contemporaneously or subsequently set forth in writing and executed by a duly
authorized officer or representative of the party to be bound thereby.
Page 10
<PAGE>
BellSouth Telecommunications, Inc. DeltaCom
BY: /s/ Jerry D. Hendrix By: /s/ Tom Mullis
--------------------------------- ------------------------------------
Signature Signature
NAME: Jerry D. Hendrix NAME: Tom Mullis
------------------------------- ----------------------------------
Printed Name Printed Name
TITLE: Director TITLE: Sr VP
------------------------------ ---------------------------------
<PAGE>
EXHIBIT "A"
APPLICABLE DISCOUNTS
The telecommunications services available for purchase by DeltaCom for the
purposes of resale to DeltaCom end users shall be available at the following
discount off of the retail rate.
<TABLE>
<CAPTION>
DISCOUNT
--------
STATE RESIDENCE BUSINESS
----- --------- --------
<S> <C> <C>
ALABAMA 10% 10%
FLORIDA 18% 12%
GEORGIA 20.3% 17.3%
KENTUCKY 10% 8%
LOUISIANA* 20.72% 20.72%
MISSISSIPPI 9% 8%
NORTH CAROLINA 12% 9%
SOUTH CAROLINA 10% 9%
TENNESSEE** 16% 16%
</TABLE>
* Effective as of the Commission's Order in Louisiana Docket No. U-22020 dated
November 12, 1996.
** The Wholesale Discount is set as a percentage off the tariffed rates. If OLEC
provides its own operator services and directory services, the discount shall
be $21.56%. These rates are effective as of the Tennessee Regulatory
Authority's Order in Tennessee Docket No. 90-01331 dated January 17, 1997.
<PAGE>
Exhibit 10.36
MASTER EQUIPMENT LEASE AGREEMENT
This Master Equipment Lease Agreement ("Master Lease") dated as of this 30th day
of October, 1995 by and between AT&T SYSTEMS LEASING CORPORATION, a Michigan
corporation (hereinafter called "Lessor"), having its principal office and place
of business at 2555 Telegraph Road, 3rd Floor, Bloomfield Hills, Michigan 48302,
and DELTACOM, INC., an Alabama corporation (hereinafter called "Lessee"), having
its principal office and place of business at 113 South Main Street, Arab, AL
35016.
The terms and conditions of this Master Lease shall be as set forth in the
Master Equipment Lease Agreement No. GL-135 dated as of April 30, 1990 by and
between XL/Datacomp, Inc. and Brindlee Mountain Telephone Company as assigned to
Lessee (the "Existing Lease"), a copy of which is attached hereto and which
terms and conditions are incorporated herein by reference, except as expressly
amended in any Schedule (which incorporates by reference this Master Lease) and
as set forth below:
1. All references to XL/Datacomp, Inc. in the Existing Lease, shall be
deleted, and replaced in the Master Lease with "Lessor";
2. Section 16 of the Existing Lease shall be deleted in its entirety, and
shall be replaced with the following:
"16. Notice: Service of all notice under this Agreement shall be
sufficient if in writing and given personally or mailed to the party involved at
its respective address herein set forth, or any such other address as such party
may provide in writing from time to time. Any such notices mailed to such
address shall be effected when deposited in the United States mails, duly
addressed with postage prepaid. Until further notice, service of all notice to
Lessor shall be given at its general office: AT&T Systems Leasing Corporation,
2555 Telegraph Road, 3rd Floor, Bloomfield Hills, Michigan 48302."
3. In the last paragraph of Section 25 of the Existing Lease, the phrase
"THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF ILLINOIS (WITHOUT
REGARD TO THE CONFLICT OF LAWS)" shall be deleted, and replaced with the
following, "THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW
JERSEY (WITHOUT REGARD TO THE CONFLICT OF LAWS)."
Except as expressly modified herein, the terms and conditions of the Existing
Lease incorporated herein shall remain unmodified. The parties hereto agree
that any amendment or modification to the Existing Lease shall not affect this
Master Lease and further that any amendment to this Master Lease shall not
affect the Existing Lease, it being the express intention of the parties that
this Master Lease may not hereafter be amended or modified except by a writing
signed by AT&T Systems Leasing Corporation and Lessee.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Master Lease to be
executed as set forth below.
DELTACOM, INC. AT&T SYSTEMS LEASING CORPORATION
BY: /s/ FOSTER O. MCDONALD /s/ MARGARET V. SAYLES
------------------------------ ------------------------------------
(Lessee Authorized Signature) (Lessor Authorized Signature)
Foster O. McDonald Margaret V. Sayles
- ---------------------------------- ------------------------------------
(Type/Print Name) (Type/Print Name)
President CONTRACT NEGOTIATOR/ANALYST
- ---------------------------------- -------------------------------------
(Title) (Title)
11/2/95 11/27/95
- ---------------------------------- -------------------------------------
(Date) (Date)
<PAGE>
[LOGO APPEARS HERE]
MASTER EQUIPMENT LEASE
Master Equipment Lease No. GL-135
----------
Brindlee Mountain Telephone Company 4-30-90
- --------------------------------------- ------------------------------------
Name of Lessee Master Equipment Lease Date
113 South Main, Arab, AL 35016
- -------------------------------------------------------------------------------
Address of Lessee
XL/DATACOMP. INC. ("XLDC") and the Lessee stated above ("Customer"), in
consideration of the mutual agreements set forth herein and in any schedule or
schedules hereto and the payment of rent as provided herein and therein, hereby
agree to the terms of this Master Equipment Lease and any schedule or schedules
hereto.
1. EQUIPMENT LEASED:This contract is a Master Equipment Lease and the terms of
each Schedule of Machines ("Schedule") hereto are subject to any and all
conditions and provisions set forth herein as may from time to time be amended.
Each Schedule shall incorporate therein all of the terms and conditions of this
Master Equipment Lease and shall contain such additional terms and conditions as
XLDC and Customer shall agree upon. Each Schedule is enforceable according to
the terms and conditions contained therein. In the event of a conflict between
the language of this Master Equipment Lease and any Schedule hereto, the terms
of the Schedule shall prevail with respect to that Schedule. This Master
Equipment Lease and all Schedules hereto are collectively referred to as the
"Agreement."
XLDC agrees to lease to Customer, and Customer agrees to lease from XLDC, in
accordance with the terms and conditions herein, the equipment and features,
together with all replacements, parts, repairs, additions, attachments and
accessories incorporated therein (collectively called the "Machines") described
in each executed Schedule which shall be made a part hereof. Lessee shall have
no right, title or interest in the Machines, except as expressly set forth in
this Agreement. XLDC shall have no obligation hereunder until the execution and
delivery of a Schedule by XLDC and Customer.
2. TERM AND RENT: The term of this Agreement shall commence on the date set
forth above and shall continue thereafter so long as any Schedule entered into
pursuant to this Agreement remains in effect.
The initial Term and the rent payable with respect to each Machine shall be as
set forth in the Schedule relating thereto. The term of any lease of Machines
hereunder shall commence on the Commencement Date specified in the Schedule
relating to such Machines and shall continue in force until terminated by XLDC
or Customer upon not less than one hundred twenty (120) days' written
notice; provided, however, that no such lease shall be so terminated prior to
the expiration of the Initial Term specified in such Schedule.
The monthly rental charge for Machines listed in each Schedule shall commence on
the Commencement Date, specified in such Schedule, and be due and payable in
advance on the first day of each month (except the first payment which shall be
a pro rata portion of the monthly rental charge calculated on thirty-day basis
and shall be due and payable when invoiced by XLDC).
Except as otherwise hereinafter expressly provided, the XLDC monthly rental
charges for all the Machines listed in each Schedule during the Initial Term
shall be the charges as set forth in the Schedule relating thereto.
After expiration of the Initial Term specified in a Schedule and so long
thereafter as this Agreement shall remain in force and effect, the monthly
rental charge for the Machines set forth in such Schedule shall be the aggregate
monthly rental charges for such Machines in effect with respect to the last
month of the Initial Term relating thereto.
3. LATE CHARGES: At its discretion, XLDC shall have the right to charge and
collect, and Customer agrees to pay late charges for rental and other amounts
due hereunder not paid when due or 10 days thereafter, said late charges to be
charged at the rate of 1 1/2% per month on the unpaid installment or the highest
amount permitted by applicable law, whichever is lower. These charges will be
billed in the following month and like the rental will be due the first day of
the month. No notice of default shall be required to be given to Customer as a
condition to Customer's becoming obligated to pay late charges.
4. PAYMENT OF TAXES: Customer covenants and agrees to pay when added to
Customer's monthly rental charges, and to reimburse and indemnify and hold XLDC
harmless from and against, all taxes, fees or other charges, however designated
or levied, on the Customer, on this Agreement, on the Machines or their use or
value for tax purposes, including (but not limited to) state and local privilege
or excise taxes based on gross revenue and any taxes or amounts in addition
thereto or in lieu thereof paid or payable by XLDC, except any taxes based upon
the net income of XLDC.
5. SECURITY INTEREST: At or prior to the Commencement Date of any lease of
Machines hereunder, and from time to time as XLDC shall request, Customer at its
own expense, will cause financing statements with respect to this Agreement to
be executed by a duly authorized representative of Customer and XLDC and filed
in the Office of the Secretary of State and County Recorder of the appropriate
jurisdiction as may be required to create a perfected security interest in the
Machines. The Customer will, at its expense, from time to time do and perform
any other act and will execute, deliver, file and record (and will re-file,
re-record, whenever required) any and all further instruments required by law or
reasonably requested by XLDC, its successors or assigns, for the protection of
the title of XLDC, its successors or assigns to the Machines, or for the purpose
of carrying out the intention of this Agreement.
6. LIENS: Customer will not directly or indirectly create, incur, assume or
suffer to exist any mortgage, security interest, pledge, charge, lien,
encumbrance or claim on or with respect to the Machines, title thereto or any
interest therein, except (a) the respective rights of XLDC and Customer as
herein provided, (b) liens or encumbrances which result from any action or
inaction of XLDC or from any claim against XLDC (other than any such liens or
encumbrances which arise from Customer's failure to perform any obligation of
Customer hereunder), (c) liens for taxes either not yet due or being contested
in the opinion of XLDC, in good faith and by appropriate proceedings and (d)
inchoate materialmen's, mechanic's, workmen's, repairmen's, employee's or other
like liens arising in the ordinary course of business and not delinquent.
Customer will immediately notify XLDC of, and Customer will immediately at its
own cost and expense take whatever action is necessary to duly discharge, any
such mortgage, security interest, pledge, charge, lien, encumbrance or claim not
excepted in (b), (c) and (d) above, when the same may arise at any time, until
the return of the Machines as provided hereunder.
7. MAINTENANCE: Customer at its sole expense shall maintain the Machines in good
operating order, repair, condition and apperance and protect the Machines from
deterioration, other than normal wear and tear. Customer at its sole expense
shall enter into, and maintain in force in accordance with the terms thereof, a
Maintenance Agreement covering the Machines with XLDC, the manufacturer of the
Machines, or such other party as shall be acceptable to XLDC (the "Maintenance
Vendor") (effective date to be the Commencement Date of this Agreement), and
Customer shall supply an executed copy thereof to XLDC and authorize the
Maintenance Vendor to notify XLDC in the event maintenance charges are not paid
by Customer when due. In such event, XLDC shall have the right, but not the
obligation, to pay all such charges and treat such amounts as additional rental
<PAGE>
hereunder. If Customer has any Machines maintained by a party other than XLDC
or the manufacturer thereof, Customer hereby assumes and agrees to pay any costs
necessary to have the manufacturer recertify the Machines at the scheduled
expiration of the term, which term shall continue upon the same terms and
conditions until such recertification has been obtained. Customer will cause the
Maintenance Vendor to keep the Machines in good working order in accordance with
the provisions of said Maintenance Agreement. All maintenance and service
charges, whether under said Maintenance Agreement or otherwise, and in addition
the expenses, if any, of the Maintenance Vendor's customer engineers charged by
such Vendor in connection with maintenance and repair services, shall be borne
by Customer.
Subject to United States security regulations, XLDC, or its designees, and
Customer's Maintenance Vendor shall have full and free access to the Machines.
8. USE: Customer shall provide safe storage and proper care for the Machines and
shall at all times use, operate and enjoy the same strictly in accordance with
all laws, ordinances and regulations from time to time in force. Cards, tapes,
other supplies, accessories and disk devices used to operate the Machines shall
meet applicable specifications of the respective Machine manufacturer(s).
9. ALTERATIONS AND ATTACHMENTS: Customer may, at its own expense and after prior
written notice to XLDC, make alterations in or attachments to the Machines,
provided that such alterations and attachments consist only of (i) any
accessory, equipment or device manufactured or sold by the manufacturer of the
Machines for installation on the Machines and installed in compliance with said
manufacturer's installation procedures, or (ii) any other accessory, equipment
or device installed on the Machines so long as such item does not interfere with
the normal operation of the Machines, increase the cost of maintenance of the
Machines, or create a safety hazard, and is capable of being removed without
causing damage to the Machines. All such alterations and attachments, unless
XLDC shall otherwise direct in writing, shall be removed by Customer and the
Machines restored to their original condition, reasonable wear and tear
excepted, upon termination of this Agreement. Any unremoved alterations and
attachments and replacements made to or placed in or upon the Machines, shall
become a component part thereof and title therein shall immediately vest in XLDC
and shall be included under the terms and provisions of this Agreement.
Customer shall not, without the prior written consent of XLDC and subject to
such conditions as XLDC may impose for its protection, affix the Machines to any
real property if, as a result thereof, the Machines will become a fixture under
applicable law. Notwithstanding the above provisions, the manufacturer of the
Machines may incorporate engineering changes or make temporary alterations to
the Machines without the consent of XLDC.
10. RISK OF LOSS: All risk of loss, theft, destruction and damage to the
Machines, from whatever cause, are assumed by Customer. Should the Machines be
damaged, Customer shall repair the Machines and after making such repair
Customer shall be entitled to reimbursement by XLDC to the extent of insurance
proceeds received by XLDC. Should the Machines be irreparably damaged, lost or
destroyed, Customer shall pay XLDC the value thereof, which shall be deemed to
be the Stipulated Loss Value as listed on the Schedules, and after making such
payment Customer shall be entitled to reimbursement by XLDC to the extent of
insurance proceeds received by XLDC.
Customer will maintain fire, with extended coverage, insurance for the term of
the Agreement on the Machines for the full value thereof, as specified above,
and will maintain public liability insurance with respect to the Machines with
minimum limits of liability per any one occurrence of not less than $250,000.
All such insurance shall name XLDC, its successors and assigns as additional
assureds or loss payees as their interest may appear, shall be with such
insurers as shall be satisfactory to XLDC and shall provide that the same may be
altered or cancelled only after ten (10) days prior written notice to such
assureds and loss payees. If any loss shall be paid to Customer and XLDC
Customer will not unreasonably withhold endorsement.
11. INDEMNITY: Customer agrees that it shall at all times defend, indemnify, and
hold XLDC, its successors and assigns, harmless from and against any and all
claims, costs, expenses, damages and liabilities (including, but not limited to,
liability for death, bodily injury and property damage), including reasonable
attorneys' fees, resulting from or pertaining to the purchase, ownership,
rental, use, operation or return of the Machines or upon the expiration of the
initial or any extended term of this Agreement.
12. DISCLAIMER OF LIABILITY: CUSTOMER AGREES THAT XLDC SHALL NOT BE LIABLE TO
CUSTOMER FOR ANY CLAIM, LOSS, DAMAGE OR EXPENSE OF ANY KIND CAUSED, DIRECTLY OR
INDIRECTLY, BY THE INADEQUACY OF ANY MACHINE FOR ANY PURPOSE OR ANY DEFICIENCY
OR DEFECT THEREIN OR ANY DELAY IN PROVIDING OR FAILURE TO PROVIDE ANY THEREOF,
OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, OR ANY LOSS OF BUSINESS
AND AGREES THAT IT WILL, IRRESPECTIVE OF ANY SUCH CLAIM, LOSS, DAMAGE OR
EXPENSE, CONTINUE TO PAY ALL MONTHLY RENTAL CHARGES IN THE AMOUNTS STATED HEREIN
WHICH MAY COME DUE DURING THE INITIAL TERM HEREOF AND THEREAFTER SO LONG AS THIS
AGREEMENT IS NOT TERMINATED IN ACCORDANCE WITH ITS TERMS. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, IT IS EXPRESSLY UNDERSTOOD THAT XLDC MAKES NO
WARRANTIES, STATUTORY, EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY,
FITNESS, CONDITION, QUALITY, CAPACITY OR DURABILITY OF THE MACHINES OR ANY PART
THEREOF, NOR SHALL XLDC BE DEEMED OBLIGATED TO PROVIDE REPLACEMENT FOR ANY OF
THE MACHINES WHICH MAY BE DESTROYED BY FIRE, THEFT, OR OTHER CASUALTY.
13. REPRESENTATIONS AND WARRANTIES OF CUSTOMER: Customer hereby represents and
warrants for the benefit of XLDC that:
(a) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of Customer.
(b) Each individual executing such on behalf of Customer was duly authorized to
do so.
(c) This Agreement constitutes a legal, valid and binding agreement of the
Customer enforceable in accordance with its terms.
(d) The Machines shall be deemed to be personal property even though attached to
a realty and will not become fixtures under applicable law.
14. SELLING TIME: The Customer shall have the unlimited right to sell time to
third parties so long as it shall retain uninterrupted possession and control
of the Machines.
15. MOVING MACHINES: Customer may move all the Machines, at its expense, upon
thirty (30) days' prior written notice to XLDC, its successors and assigns, to
any other location of Customer, or any location of any Division or Subsidiary of
Customer, within the continental United States (but in no event to any location
outside the Continental United States), provided, however, that the state of
such relocation shall have in effect the Uniform Commercial Code, and that all
costs (including, without limitation, additional property taxes or other taxes,
any additional expense of insurance coverage, and any expense associated with
the protection of the title and interest of XLDC, its successors and assigns to
and in the Machines) resulting from such movement shall be borne by Customer. In
the event of such movement, Customer and such Division or Subsidiary of
Customer, if any, shall cooperate with XLDC in taking all necessary, appropriate
and reasonable measures to protect the title of XLDC, and the interest of any
successor or assignee of XLDC, to and in the Machines.
16. NOTICE: Service of all notice under this Agreement shall be sufficient if in
writing and given personally or mailed to the party involved at is respective
address herein set forth, or any such other address as such party may provide in
writing from time to time. Any such notices mailed to such address shall be
effective when deposited in the United States mails, duly addressed with postage
prepaid. Until further notice, service of all notice to XLDC shall be given at
its general office, XL/DATACOMP, INC., 908 North Elm Street, Hinsdale, Illinois
60521.
17. TRANSPORTATION AND INSTALLATION: All transportation, rigging, traffic and
drayage charges upon delivery of the Machines to Customer's site and upon final
re-delivery of the Machines to a location designated by XLDC (including, without
limitation, the costs of in-transit insurance) are to be paid by Customer. All
costs involved in installation and de-installation by qualified labor are the
responsibility of the Customer.
18. RETURN OF MACHINES: Upon the expiration of the initial term or any extended
term of any lease of Machines under this Agreement, Customer shall return the
Machines so leased to XLDC, or any person designated by XLDC to Customer in
writing, by making the same available, appropriately crated for transport by
truck, at the loading dock of the building which shall be the location of the
Machines upon such expiration, at Customer's sole cost and expense.
19. LEASING ONLY: This Agreement is one of leasing only and Customer shall not
have or acquire any right, title or interest in or to any of the Machines except
the right to use and operate the same as herein provided. Labels or other
markings may be affixed and maintained on the Machines by XLDC indicating XLDC
as the owner thereof. Customer shall keep the Machines free from any marking or
labeling which might be interpreted as a claim of ownership thereof or other
interest therein.
* by Customer, its assigns, licensee or successors in interest
<PAGE>
20. REIMBURSEMENT: All advances made by XLDC to discharge and pay any charges
or any liens or encumbrances on the Machines for which Customer is liable
hereunder shall be added to the unpaid balance of the monthly rental charge due
and to become due and collectible as rent hereunder and shall be repayable by
Customer to XLDC immediately, together with interest thereon at 1 1/2% per month
or the highest lawful rate, whichever is lower.
21. ASSIGNMENT: This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and (to the extent specified
in any assignment) assigns. Customer, however, shall not assign this Agreement
or sublet any Machines without first obtaining the written consent of XLDC,
which such consent shall not be unreasonably withheld, provided that in no event
will it be deemed unreasonable for XLDC to require as a condition to any such
consent that Customer not be relieved of liability hereunder. In the event of
any assignment or sublet by Customer, Customer, it assigns, or its sublessee, if
any, shall cooperate with XLDC in taking all reasonable measures to protect the
interest or title of XLDC, its successors and assigns, in or to the Machines.
Customer acknowledges and understands that XLDC anticipates either selling and
assigning its interest in the Machines, or granting a security interest in the
Machines to a lender in consideration of a loan to XLDC. Customer agrees that
with respect to the monthly rental charges and any other payments due and to
become due to XLDC under his Agreement, it shall not, as to any assignee of
XLDC's rights under this Agreement, assert against such assignee, any defense,
set-off or counterclaim (including recoupment against or any diminution of
amounts payable by Customer to such assignee) which it may have against XLDC.
XLDC covenants that Customer shall quietly possess the Machines under this
Agreement notwithstanding any such assignment by XLDC, subject to and in
accordance with the provisions of this Agreement so long as Customer is not in
default hereunder.
22. DEFAULT BY CUSTOMER: It shall be deemed a Default by Customer hereunder if
the Customer (a) defaults in the payment of any sum of money due hereunder
beyond the tenth (10th) day after the same shall become due hereunder; (b)
defaults in the performance of any other of its obligations under this Agreement
for a continuous period of thirty (30) days after receipt by Customer of written
notice thereof from XLDC, its successors or assigns; (c) performs any
affirmative act of insolvency, or files any petition or takes any other action
under any bankruptcy, reorganization, insolvency or moratorium law, or any other
law or laws for the relief of, or relating to, debtors; (d) is the subject of
filing of any involuntary petition under any bankruptcy statute which is not
dismissed within sixty (60) days thereafter, or the appointment of any receiver
or trustee to take possession of the properties of Customer, unless such
petition or appointment is set aside or withdrawn or ceases to be in effect
within sixty (60) days from the date of said filing or appointment; (e) has a
substantial part of its property or any part of the Machines subjected to any
levy, seizure, assignment or sale for or by any creditor or governmental agency;
or (f) defaults under any other agreement between Customer and XLDC, its
successors or assigns. In the event of any Default, XLDC, its successors or
assigns, may at its option: (i) terminate this Agreement; (ii) whether, or not
this Agreement is terminated, take immediate possession of any or all of the
Machines, wherever situated, and for such purpose, enter upon any premises
without liability for so doing; (iii) sell, dispose of, hold, use or lease any
Machines as XLDC in its sole discretion may decide, without any duty to account
to Customer, and Customer shall remain liable for the remaining unpaid rent for
the balance of the respective initial Term relating to such Machines and for
other charges payable by Customer in accordance with this Agreement; (iv)
declare immediately due and payable all rentals remaining unpaid for the balance
of the term of the lease in which event the same shall be accelerated and
immediately due and payable, and shall be deemed liquidated damages and not a
penalty; and (v) exercise any other right or remedy which may be available under
applicable law. The above remedies, to the extent permitted by law, shall be
deemed cumulative and may be exercised successively or concurrently.
23. ENFORCEMENT OF WARRANTY: Upon receipt of a written request from Customer,
XLDC hereby agrees, so long as this Agreement shall remain in force, to take all
reasonable action requested by Customer to enforce any manufacturer's warranty,
express or implied, issued on or applicable to each Machine, which is
enforceable by XLDC in its own name, and represents that it will take all
reasonable action to obtain for Customer all service furnished by a manufacturer
in connection therewith; provided, however, that XLDC shall not be obligated to
commence any suit or action or resort to litigation to enforce any such warranty
unless Customer shall pay all expense in connection therewith.
Similarily, if any such warranty shall be enforceable by Customer in its own
name, Customer hereby agrees, upon receipt of written request from XLDC, so long
as this Agreement shall remain in force, to take all reasonable action requested
by XLDC to enforce any such warranty.
24. FINANCIAL INFORMATION: During each year of the term of this Agreement, as
soon as practicable after the close of each fiscal year of Customer, Customer
will furnish to XLDC a copy of its annual audit report prepared by independent
certified accountants, or other accountants satisfactory to XLDC, unless the
equivalent of such report is available to XLDC upon request, without charge or
investment, in the form of Customer's annual report to shareholders, during each
such year at such time.
25. GENERAL: The terms and conditions of this Agreement supersede those of all
previous agreements between the parties with respect to the use of the Machines,
and such use hereafter is subject to the terms and conditions of this Agreement.
No modification or waiver of any of the terms and conditions of this Agreement
nor consent to any departure therefrom by Customer shall in any event be
effective unless the same shall be in writing signed by XLDC and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose given. Any provision hereof prohibited by, or unlawful or
unenforceable under, any applicable law of any jurisdiction shall be ineffective
without invalidating the remaining provisions of this Agreement; provided,
however, that where the provisions of any such applicable law may be waived,
they are hereby waived by Customer to the full extent permitted by law to the
end that this Agreement shall be deemed to be a valid and binding Agreement
enforceable in accordance with its terms.
If legal action is required to enforce the terms and conditions of the
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ALABAMA AND
CONSTITUTES THE ENTIRE AGREEMENT BETWEEN CUSTOMER AND XLDC WITH RESPECT TO THE
FURNISHING OF MACHINE USE HEREUNDER. PARTIES AGREE PROPER VENUE TO BE ALABAMA.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on behalf of each of them as of the date set forth at the beginning of
this Agreement.
Brindlee Mountain Telephone Company
-----------------------------------
Customer
By: [SIGNATURE ILLEGIBLE] By: /s/ Foster O. McDonald
----------------------------------- --------------------------------
Its duly authorized representative
Title: Vice President
--------------------------------
<PAGE>
SCHEDULE NO. 001 DATED: OCTOBER 30, 1995
TO MASTER EQUIPMENT LEASE AGREEMENT DATED OCTOBER 30, 1995 (THE "MASTER LEASE").
LESSEE: DELTACOM, INC.
LOCATION OF MACHINES: 113 S. Main St., Arab AL 35016
COMMENCEMENT DATE: Upon Acceptance
INITIAL TERM: 48 months after the first day of the month
following the Commencement Date
<TABLE>
<CAPTION>
STIPULATED
SERIAL MONTHLY LOSS VALUE
QTY MFG TYPE MODEL DESCRIPTION NUMBER RENT AMOUNT
- --- --- ---- ----- ----------- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
SEE ATTACHED EXHIBIT A
----------
TOTALS: $25,618.00*
-------------
$36,284.00** $1,537,515.00
* Month 1
** Months 2 - 48
</TABLE>
SOFTWARE: Lessor and Lessee acknowledge that the Machines listed on this
Schedule may include certain software ("Software") in which Lessor and Lessee
have no ownership or other proprietary rights. Where required by the Software
owner or manufacturer, Lessee shall enter into a license or other agreement for
the use of the Software. Any Software agreement shall be separate and distinct
from the Master Lease and any Schedule, and Lessor shall not have any rights or
obligations thereunder unless otherwise agreed. In the event the Rent on a
Schedule includes an amount attributable to the financing by Lessor of Lessee's
fee for the use of Software, Lessee agrees that such amounts shall be deemed
Rent hereunder.
SPECIAL TERMS: Until Schedule No. 001 and the Certificate of Acceptance are
executed by Lessee, the terms and conditions of Schedule I dated November 13,
1994 ("Terminating Schedule"), under Master Equipment Lease GL-135 dated April
30, 1990 between AT&T SYSTEMS LEASING CORPORATION (f/k/a/ XL/DATACOMP, INC.) and
Lessee shall apply. If the Schedule No. 001 and the Certificate of Acceptance
are executed by Lessee, the obligation to pay Rent under the Terminating
Schedule shall cease as of November 30, 1995. Upon full execution of this
Schedule No. 001 and the Certificate of Acceptance, provided no Default has
occurred, the Terminating Schedule shall terminate (the "Termination Date") and
Lessee shall have no further obligation or liability thereunder except for those
obligations and liabilities relating to Lessor's rights, privileges and
indemnities, to the extent that they are fairly attributable to events or
conditions occurring or existing on or prior to the full execution of this
Schedule No. 001 and Certificate of Acceptance which specifically survive the
termination of the Terminating Schedule. In the event the Commencement Date of
this Schedule is other than the Termination Date of the Schedule, Lessee may be
required to pay interim rent under this Schedule for the period from the
Termination Date until the Commencement Date. Lessee acknowledges and agrees
that the Rental Payment and the Stipulated Loss Value Amount include an amount
attributed to the financing of Lessee's obligations under the Terminating
Equipment Schedule.
<PAGE>
MASTER LEASE: This schedule is entered into pursuant to the Master Lease
identified above, a copy of which each party herto has been provided. All of the
terms, conditions, representations and warranties of the Master Lease are hereby
incorporated by reference herein and made a part hereof as if they were
expressly set forth in this Schedule. This Schedule constitutes a separate lease
with respect to the Machines described herein. By their execution and delivery
of this Schedule, the parties hereby reaffirm as of the date hereof all of the
terms, conditions, representations and warranties of the Master Lease, except as
modified herein. In calculating the Stipulated Loss Value with regard to item 10
in the Master Lease, the Stipulated Loss Value shall be calculated with respect
to the loss ("Loss") pursuant to the document entitled, Stipulated Loss Values.
Discount rate: In calculating present value with regard to item 22 of the Master
Lease, the discount rate to be used will be the lesser of the Federal Reserve
discount window borrowing rate in effect at the Commencement Date or 7%.
DELTACOM, INC. AT&T SYSTEMS LEASING CORPORATION
By: /s/ Foster O. McDonald By: /s/ Margaret V. Sayles
------------------------------ --------------------------------
Title: PRESIDENT Title: CONTRACT NEGOTIATOR/ANALYST
---------------------------- ----------------------------
Date: 11/02/95 Date:______________________________
-----------------------------
<PAGE>
EXHIBIT A
DELTACOM, INC.
EQUIPMENT SCHEDULE NO. 001
<TABLE>
<CAPTION>
QTY MOD./TYPE DESCRIPTION
--- --------- -----------
<S> <C> <C>
1 9406/320/2051 System Unit
2 9406/3133 64MB main Storage
1 9406/2644 34XX Attach.
1 9406/5061 Storage Expansion Tower
1 9406/5062 System Unit Expansion Tower
1 9406/5052 16 Disk Unit Stor. Exp.
1 9406/5143 Bulk 400 Watt Power Supply
1 9406/2612 EIA 232/V.24 1-Line
2 9406/6605 1.03GB Disk
28 9406/6607 4.19GB Disk
2 9406/6512 Disk Unit Controller
*1 9406/2621 Tape Attach
*1 9406/2626 Token Ring Attach.
*2 9406/6140 Workstation Controller
*2 9406/2623 6-Line Comm Controller
*4 9406/2609 EIA 232/v.24 2-Line
*1 9406/6501 Tape Controller
1 9348/002 Magnetic Tape Unit
1 3490/E01 34XX 1/2" Tape Subsystem
*1 2440/A12 IBM Tape Unit
*1 5853/001 Modem
*1 9331/001 Diskette Unit
*1 9309/002 Rack
*1 Inter 2201 Uni Switch 2X1
*Equipment to be retained by Customer from Schedule I
EQUIPMENT TO BE RETURNED TO IBM FROM SCHEDULE I:
1 9406/F60 System Unit
2 9406/3131 64MB Main Storage
1 9406/6155 EIA 232/V.24 1 Line Adapter
EQUIPMENT TO BE RETURNED TO LESSOR FROM SCHEDULE I:
1 9406/5042 System Unit Expansion
1 9406/2622 34XX Tape Attachment
2 9406/6501 DASD Controller Card
3 9638/240 5.9GB/16MB Cache RAID V DASD
10 9638/1220N 1.967GB Add'l Disk
3 9638/BH01 1.967GB Hot Spare
</TABLE>
<PAGE>
STIPULATED LOSS VALUES
Under the Master Equipment Lease Agreement dated as of October 30, 1995
between AT&T SYSTEMS LEASING CORPORATION (Lessor) and
DELTACOM, INC. (Lessee)
The Stipulated Loss Value of a Machine is equal to the Stipulated Loss
Value Amount of that Machine multiplied by its Stipulated Loss Value Percentage
which is determined by looking in the table below for the Stipulated Loss Value
Percentage opposite the monthly rental period in which the loss or Default
occurs.
<TABLE>
<CAPTION>
Monthly Rental Stipulated Loss Monthly Rental Stipulated Loss
Period Value Percentage Period Value Percentage
------ ---------------- ------ ----------------
<S> <C> <C> <C>
1 and Prior 110.20 31 79.60
2 109.18 32 78.58
3 108.16 33 77.56
4 107.14 34 76.54
5 106.12 35 75.52
6 105.10 36 74.50
7 104.02 37 73.48
8 103.06 38 72.46
9 102.04 39 71.44
10 101.02 40 70.42
11 100.00 41 69.40
12 98.98 42 68.38
13 97.96 43 67.36
14 96.94 44 66.34
15 95.92 45 65.32
16 94.90 46 64.30
17 93.88 47 63.28
18 92.86 48 62.26
19 91.84 49 61.24
20 90.82 50 60.22
21 89.80 51 59.20
22 88.78 52 58.18
23 87.76 53 57.16
24 86.74 54 56.14
25 85.72 55 55.12
26 84.70 56 54.10
27 83.68 57 53.08
28 82.66 58 52.06
29 81.64 59 51.04
30 80.62 60 50.02
</TABLE>
<PAGE>
Exhibit 10.37
Network Products Purchase Agreement Number DM-11/95-DC
Page 1
(5/25/95) st7226h
NETWORK PRODUCTS PURCHASE AGREEMENT
This Agreement Number DM-11/95-DC ("Agreement") is made by and between Northern
Telecom Inc., a Delaware corporation having offices at 4001 East Chapel Hill-
Nelson Highway, Research Triangle Park, North Carolina 27709 ("Nortel"), and
DeltaCom, Inc., a Alabama corporation, having its principal offices and place of
business at 113 South Main Street, Post Office Box 1233, Arab, Alabama 35016
("Buyer").
WITNESSETH:
WHEREAS, Buyer desires to obtain and Nortel desires to provide certain
telecommunications equipment and software for Buyer's internal use in its
network and certain related services to provide telecommunications service;
NOW THEREFORE, Nortel and Buyer agree as follows:
1. SCOPE
1.1 Exhibit A sets forth certain defined terms which shall have the
meanings set forth in Exhibit A.
1.2 The terms and conditions of this Agreement shall apply to the purchase
by Buyer and the sale by Nortel of Equipment and Services and the
licensing of Software furnished in connection with such Equipment. The
terms and conditions contained in a Product Attachment shall modify
and/or supplement the other terms and conditions of this Agreement,
only with respect to the Product Line and Services described in the
Product Attachment.
1.3 All Products and Services obtained by Buyer pursuant to this Agreement
shall be obtained by Buyer solely for initial use by Buyer in its
internal business to provide services available through its networks,
and not as stock in trade or inventory which is intended for resale by
Buyer to any third party as new and unused material. All such Products
shall be installed in the United States.
2. TERM
2.1 This Agreement shall be in effect during the period that any Product
Attachment is in effect. Each Product Attachment shall be in effect
during the Product Attachment Term with respect thereto. This
Agreement or any part thereof may be terminated in accordance with the
express provisions of this Agreement concerning termination or by
written
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 2
agreement of the parties.
2.2 The termination of this Agreement or any part thereof shall not affect
the obligations of either party thereunder with respect to any
accepted Order which have not been fully performed, unless such Order
is expressly terminated in accordance with this Agreement or by
written agreement of the parties.
3. ORDERING
All purchases pursuant to this Agreement shall be made by means of Orders
issued from time to time by Buyer and accepted by Nortel in writing within
fifteen (15) days. If an Order is not accepted by Nortel within such
fifteen (15) day period, such Order shall be deemed to be void. All Orders
shall reference this Agreement and shall be governed solely by the terms
and conditions set forth herein as modified and/or supplemented pursuant to
Section 1.2 by the terms and conditions of any applicable Product
Attachments.
4. PRICES
4.1 The prices, charges, and fees applicable to Orders for Products and/or
Services shall be set forth in the appropriate Product Attachments and
may be revised in accordance with the provisions stated therein.
Transportation charges, including insurance, shall be payable by Buyer
in accordance with the applicable Product Attachment.
4.2 Until the total of all prices, charges and fees for Products and
related Services furnished hereunder shall have been paid to Nortel,
Buyer shall cooperate with Nortel in perfecting Nortel's purchase
money security interest in such Products and Buyer shall promptly
execute all documents and take all actions required by Nortel in
connection therewith. Buyer shall not sell, lease or otherwise
transfer such Products or any portion thereof or allow any liens or
encumbrances to attach to such Products or any portion thereof prior
to payment in full to Nortel of the total of all such prices, charges,
and fees.
5. TERMS OF PAYMENT
5.1 The amounts payable for Products and/or Services may be invoiced by
Nortel to Buyer in accordance with the applicable Product Attachments.
All amounts payable and properly invoiced pursuant to this Agreement
shall be paid by Buyer to Nortel within thirty (30) days from the date
of Nortel's invoice in accordance with the payment instructions
contained in such invoice.
5.2 Overdue payments, excluding those which are the subject of a good
faith
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 3
dispute, shall be subject to interest charges, calculated daily
commencing on the 31st day after the date of the invoice, at one and
one half percent (1-1/2%) per month or such lesser rate as may be the
maximum permissible rate under applicable law.
6. TAXES
Buyer shall at Nortel's direction promptly reimburse Nortel or pay directly
to the applicable government or taxing authority all taxes and charges
arising hereunder, including, without limitation, penalties and interest,
except for taxes computed upon the net income of Nortel. Buyer's
obligations pursuant to this Section 6 shall survive any termination of
this Agreement.
7. RISK OF LOSS, TITLE
7.1 Risk of loss or damage to Products shall pass to Buyer upon delivery
to the loading dock at the installation site or other delivery
location specified by Buyer in its Order, and Buyer shall keep such
Products fully insured for the total amount then due Nortel for such
Products.
7.2 Good title to Equipment furnished hereunder which shall be free and
clear of all liens and encumbrances shall vest in Buyer upon full
payment by Buyer of the total prices, charges and fees payable by
Buyer for such Equipment and any related Software or Services
furnished by Nortel in connection with such Equipment.
7.3 Buyer shall receive a license to use Software subject to the terms set
forth in Exhibit B.
8. TESTING, TURNOVER AND ACCEPTANCE
8.1 If Nortel installs any Products furnished hereunder, the rights and
obligations of the parties with respect to testing, turnover and
acceptance of such Products shall be as set forth in the applicable
Product Attachment.
8.2 If Nortel does not install Products furnished hereunder, Nortel shall
prior to delivery of the Products perform such factory tests as Nortel
determines to be appropriate in order to confirm that such Products
shall be in accordance with the applicable Specifications. Buyer shall
be deemed to have accepted the Products upon completion of such tests.
8.3 In the event that Buyer places Products into revenue-generating
service, such Products shall be deemed to have been accepted by Buyer
without limitation or restriction.
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 4
9. DISCLAIMERS OF WARRANTIES AND REMEDIES
THE WARRANTIES AND REMEDIES SET FORTH IN EXHIBIT D AND IN ANY PRODUCT
ATTACHMENT CONSTITUTE THE ONLY WARRANTIES OF NORTEL WITH RESPECT TO THE
PRODUCTS AND SERVICES AND BUYER'S EXCLUSIVE REMEDIES IN THE EVENT SUCH
WARRANTIES ARE BREACHED. THEY ARE IN LIEU OF ALL OTHER WARRANTIES, WRITTEN
OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NORTEL
SHALL NOT BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
NATURE WHATSOEVER, BEFORE OR AFTER THE PLACING OF ANY PRODUCT INTO SERVICE.
10. LIABILITY FOR PERSONAL INJURY, PROPERTY DAMAGE AND PATENT INFRINGEMENT
10.1 A party hereto shall defend the other party against any suit, claim,
or proceeding brought against the other party for direct damages due
to personal injuries (including death) or damage to tangible property
which allegedly result from the negligence or willful misconduct of
the defending party in the performance of this Agreement. The
defending party shall pay all litigation costs, reasonable attorney's
fees, settlement payments and such direct damages awarded or
resulting from any such suit, claim or proceeding.
10.2 Nortel shall defend Buyer against any suit, claim or proceeding
brought against Buyer alleging that any Products, excluding Vendor
Items, furnished hereunder infringe any United States patent. Nortel
shall pay all litigation costs, reasonable attorney's fees,
settlement payments and any damages awarded or resulting from any
such suit, claim or proceeding. With respect to Vendor Items, Nortel
shall assign any rights with respect to infringement of U.S. patents
granted to Nortel by the supplier of such Vendor Items to the extent
of Nortel's right to do so.
10.3 The party entitled to defense pursuant to Section 10.1 or 10.2 shall
promptly advise the party required to provide such defense of the
applicable suit, claim, or proceeding and shall cooperate with such
party in the defense or settlement thereof. The party required to
provide such defense shall have sole control of the defense of the
applicable suit, claim, or proceeding and of all negotiations for its
settlement or compromise.
10.4 If an injunction is obtained against Buyer's use of any Products as
a result of any suit, claim, or proceeding described in Section 10.2,
Nortel shall at Nortel's option use its reasonable efforts to either:
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 5
10.4.1 procure for Buyer the right to continue using the portions of the
Products enjoined from use; or
10.4.2 replace or modify the same with equivalent or better Products so
that Buyer's use is not subject to any such injunction.
10.5 If Nortel cannot perform under Section 10.4.1 or 10.4.2, Buyer shall have
the right to return the infringing Products to Nortel upon written notice
to Nortel, and in the event of such return, neither party shall have any
further liabilities or obligations under this Agreement on account of such
infringement or return, except Nortel shall refund the depreciated value of
such Products carried on Buyer's books at the time of such return, less any
outstanding monies due Nortel hereunder.
10.6 The obligations of Nortel hereunder with respect to any suit, claim, or
proceeding described in Section 10.2 shall not apply with respect to
Products which are (a) manufactured or supplied by Nortel in accordance
with any design or any special instruction furnished by Buyer, (b) used by
Buyer in a manner or for a purpose not contemplated by this Agreement, (c)
located by Buyer outside the United States, or (d) used by Buyer in
combination with other products not provided by Nortel, including, without
limitation, any software developed solely by Buyer through the permitted
use of Products furnished hereunder, provided the infringement arises from
such combination or the use thereof. Buyer shall indemnify and hold Nortel
harmless against any loss, cost, expense, damage, settlement or other
liability, including, but not limited to, attorneys' fees, which may be
incurred by Nortel with respect to any suit, claim, or proceeding described
in this Section 10.6.
10.7 Notwithstanding the above, Nortel's total liability to Buyer with regard
to suits, claims, or proceedings described in Section 10.2 which involve
Service Use shall not exceed the applicable Service Use Limit. Buyer shall
reimburse Nortel all amounts paid or incurred by Nortel with respect to any
such suits, claims, or proceedings in excess of the applicable Service Use
Limit.
10.8 If Nortel determines that any Products are or may become the subject of
any suit, claim, or proceeding involving Service Use, Nortel may provide
Buyer with notice to that effect. Nortel shall have no liability to Buyer
pursuant to Section 10.2, 10.4, or 10.5 with respect to Buyer's use of such
Products which occurs subsequent to such notice. In addition to its
obligations pursuant to Section 10.3, if Buyer becomes aware that any
Products may become the subject of any such suit, claim, or proceeding
before receiving any such notice from Nortel, Buyer shall provide Nortel
with notice to that effect.
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 6
10.9 After receipt of notice from Nortel pursuant to Section 10.8, Buyer
shall have the option to return to Nortel the applicable Products
identified in such notice and Nortel shall refund the depreciated
value (as carried on the books of Buyer) of the returned Products to
Buyer as more fully set forth in Section 10.5.
10.10 The provisions of Sections 10.2 through 10.9 state the entire
liability of Nortel and its suppliers and the exclusive remedy of
Buyer with respect to any suits, claims, or proceedings of the nature
described in Section 10.2.
10.11 Each party's respective obligations pursuant to this Section shall
survive any termination of this Agreement.
11. REMEDIES AND LIMITATION OF LIABILITY
11.1 Nortel shall have the right to suspend its performance by written
notice to Buyer and forthwith remove and take possession of all
Products that shall have been delivered to Buyer, if, prior to
payment to Nortel of any amounts due pursuant to this Agreement with
respect to such Products, Buyer shall (a) become insolvent or
bankrupt or cease, be unable, or admit in writing its inability, to
pay all debts as they mature, or make a general assignment for the
benefit of, or enter into any arrangement with, creditors, (b)
authorize, apply for, or consent to the appointment of, a receiver,
trustee, or liquidator of all or a substantial part of its assets or
have proceedings seeking such appointment commenced against it which
are not terminated within thirty (30) days of such commencement, or
(c) file a voluntary petition under any bankruptcy or insolvency law
or under the reorganization or arrangement provisions of the United
States Bankruptcy Code or any similar law of any jurisdiction or have
proceedings under any such law instituted against it which are not
terminated within thirty (30) days of such commencement.
11.2 In the event of any material breach of this Agreement which shall
continue for thirty (30) or more days after written notice of such
breach (including a reasonably detailed statement of the nature of
such breach) shall have been given to the breaching party by the
aggrieved party, the aggrieved party shall be entitled at its option
to avail itself of any and all remedies available at law or equity,
except as otherwise provided in this Agreement.
11.3 Nothing contained in Section 11.2 or elsewhere in this Agreement
shall make Nortel liable for any incidental, indirect, consequential
or special damages of any nature whatsoever for any breach of this
Agreement whether the claims for such damages arise in tort,
contract, or otherwise, or shall increase the liability of Nortel
under Section 9 or 10 or Exhibit D beyond that prescribed therein.
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 7
11.4 Nortel shall not be liable for any additional costs, expenses, losses
or damages resulting from errors, acts or omissions of Buyer,
including, but not limited to, inaccuracy, incompleteness or
untimeliness in the provision of information by Buyer to Nortel or
fulfillment by Buyer of any of its obligations under this Agreement.
Buyer shall pay Nortel the amount of any such costs, expenses, losses
or damage incurred by Nortel.
11.5 Any action for breach of this Agreement or to enforce any right
hereunder shall be commenced within two (2) years after the cause of
action accrues or it shall be deemed waived and barred, except any
action for nonpayment by Buyer of any prices, charges, or fees
payable hereunder may be brought by Nortel at any time permitted by
applicable law.
11.6 The limitations on Nortel's liability and other obligations set forth
in Sections 9,10, and 11 shall survive any termination of this
Agreement.
12. FORCE MAJEURE
If the performance by a party of any of its obligations under this
Agreement shall be interfered with by reason of any circumstances beyond
the reasonable control of that party, including without limitation,
unavailability of supplies or sources of energy, power failure, breakdown
of machinery, or labor difficulties, including without limitation, strikes,
slowdowns, picketing or boycotts, then that party shall be excused from
such performance for a period equal to the delay resulting from the
applicable circumstances and such additional period as may be reasonably
necessary to allow that party to resume its performance. With respect to
labor difficulties as described above, a party shall not be obligated to
accede to any demands being made by employees or other personnel.
13. CONFIDENTIAL INFORMATION
13.1 Each party which receives the other party's Confidential Information
shall use reasonable care to hold such Confidential Information in
confidence and not disclose such Confidential Information to anyone
other than to its employees and employees of its affiliates with a
need to know. A party that receives the other party's Confidential
Information shall not reproduce such Confidential Information, except
to the extent reasonably required for the performance of its
obligations pursuant to this Agreement and in connection with any
permitted use of such Confidential Information.
13.2 Buyer shall take reasonable care to use Nortel's Confidential
Information only for study, operating, or maintenance purposes in
connection with Buyer's use of Products furnished by Nortel pursuant
to this Agreement.
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 8
13.3 Nortel shall take reasonable care to use Buyer's Confidential
Information only to perform Nortel's obligations to provide Products
and/or Services to Buyer, provided Nortel may use any of Buyer's
Confidential Information for the development, manufacture, marketing
and maintenance of new products and/or services and/or changes or
modifications to the existing Products and/or Services, which Nortel
may, in either case, provide to third parties without restriction.
13.4 The obligations of either party pursuant to this Section 13 shall not
extend to any Confidential Information which was already known to the
recipient prior to its disclosure to the recipient, was known or
generally available to the public at the time of disclosure to the
recipient, becomes known or generally available to the public (other
than by act of the recipient) subsequent to its disclosure to the
recipient, is disclosed or made available in writing to the recipient
by a third party having a bona fide right to do so, or is required to
be disclosed by process of law, provided that the recipient shall
notify the disclosing party promptly upon any request or demand for
such disclosure.
13.5 The parties' obligations pursuant to this Section 13 shall survive
any termination of this Agreement.
14. BUYER'S RESPONSIBILITIES
14.1 All sites at which the Products shall be delivered or installed shall
be prepared by Buyer in accordance with Nortel's standards,
including, without limitation, environmental requirements.
14.2 Buyer shall provide Nortel-designated personnel access to the
Products during the times deemed necessary by Nortel to install,
maintain and service the Products in accordance with Nortel's
obligations. Nortel personnel shall comply with Buyer's reasonable
site and security regulations, provided Nortel receives written
notice of any such regulations reasonably in advance of the arrival
of Nortel's personnel at the site.
14.3 Buyer shall provide reasonable working space and facilities,
including heat, light, ventilation, telephones, electrical current,
trash removal and other necessary utilities for use by Nortel-
designated maintenance personnel, and adequate secure storage space,
if required by Nortel, for Products and materials. Buyer shall also
provide adequate security for the Products while on Buyer's site.
14.4 Buyer shall obtain all necessary governmental permits applicable to
Buyer in connection with the installation, operation, and maintenance
of Products furnished hereunder, excluding any applicable permits
required
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 9
in the normal course of Nortel's doing business.
14.5 Any information which Nortel reasonably requests from Buyer and which
is necessary for Nortel to properly install or maintain the Products
shall be provided by Buyer to Nortel in a timely fashion and in a
form reasonably specified by Nortel.
15. HAZARDOUS MATERIALS
15.1 Prior to issuing any Order for Services to be performed at Buyer's
facilities, Buyer shall identify and notify Nortel in writing of the
existence of all Hazardous Materials which Nortel may encounter
during the performance of such Services, including, without
limitation, any Hazardous Materials contained within any equipment to
be removed by Nortel.
15.2 If Buyer breaches its obligations pursuant to Section 15.1, (a)
Nortel may discontinue the performance of the appropriate Services
until all the applicable Hazardous Materials have been removed or
abated to Nortel's satisfaction by Buyer at Buyer's sole expense, and
(b)Buyer shall defend, indemnify and hold Nortel harmless from any
and all damages, claims, losses, liabilities and expenses, including,
without limitation, attorneys' fees, which arise out of Buyer's
breach, of such obligations. Buyer's obligations pursuant to this
Section 15.2 shall survive any termination of this Agreement.
16. SUBCONTRACTING
Nortel may subcontract any of its obligations under this Agreement, but no
such subcontract shall relieve Nortel of primary responsibility for
performance of its obligations.
17. REGULATORY COMPLIANCE
In the event of any change in the Specifications or Nortel's manufacturing
or delivery processes for any Products as a result of the imposition of
requirements by any government, Nortel may upon notice to Buyer, increase
its prices, charges and fees to cover the added costs and expenses directly
and indirectly incurred by Nortel as a result of such change.
18. GENERAL
18.1 If any of the provisions of this Agreement shall be invalid or
unenforceable under applicable law and a party deems such provisions
to be material, that party may terminate this Agreement upon notice
to the
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 10
other party. Otherwise, such invalidity or unenforceability shall not
invalidate or render this Agreement unenforceable, but this Agreement shall
be construed as if not containing the particular invalid or unenforceable
provision and the rights and obligations of the parties shall be construed
and enforced accordingly.
18.2 A party shall not release without the prior written approval of the other
party any advertising or other publicity relating to this Agreement wherein
such other party may reasonably be identified. In addition each party shall
take reasonable precautions to keep the existence and the contents of this
Agreement confidential so long as this Agreement remains in effect and for
a period of three (3) years thereafter, except as may be reasonably
required to enforce this Agreement or by law.
18.3 The construction, interpretation and performance of this Agreement shall
be governed by the laws of the State of North Carolina, except for its
rules with respect to the conflict of laws.
18.4 Neither party may assign or transfer this Agreement or any of its rights
hereunder without the prior written consent of the other party, such
consent not to be unreasonably withheld, except Nortel may assign or
transfer all or any part of this Agreement or of its rights hereunder to
any Affiliate without Buyer's consent.
18.5 Notices and other communications shall be transmitted in writing by
certified United States Mail, postage prepaid, return receipt requested, by
guaranteed overnight delivery, or by facsimile addressed to the parties as
follows:
To Buyer: DeltaCom, Inc.
113 South Main Street
Post Office Box 1233
Arab, Alabama 35016
Attention: Mr. David Hill
Facsimile: (205) 586-1365
To Nortel: Northern Telecom Inc.
2221 Lakeside Blvd.
Richardson, Texas 75082-4399
Attention: Vice President, Carrier Networks
Facsimile: (214) 684-3804
In addition, notices submitted by Buyer to Nortel specific to any Product
Attachment shall be delivered to the address stated in the applicable
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 11
Product Attachment along with a copy submitted to Nortel at the address
stated above.
Any notice or communication sent under this Agreement shall be deemed
given upon receipt, as evidenced by the United States Postal Service
return receipt Mail if given by certified United States Mail, on the
following business day if sent by guaranteed overnight delivery, or on the
transmission date if given by facsimile during the receiving party's
normal business hours.
The address information listed for a party in this Section or any Product
Attachment may be changed from time to time by that party by giving notice
to the other as provided above.
18.6 In the event of a conflict between the provisions of this Agreement which
are not contained in a Product Attachment and the provisions of a Product
Attachment, the provisions of the Product Attachment shall prevail with
respect to the Product Line and Services described in that Product
Attachment.
18.7 All headings used herein are for index and reference purposes only, and
shall not be given any substantive effect. This Agreement has been created
jointly by the parties, and no rule of construction requiring
interpretation against the drafter of this Agreement shall apply in its
interpretation.
18.8 Buyer shall not export any technical data received from Nortel pursuant to
this Agreement, or release any such technical data with the knowledge or
intent that such technical data will be exported or transmitted to any
country or to foreign nationals of any country, except in accordance with
applicable U.S. law concerning the exporting of such technical data. Buyer
shall obtain all authorizations from the U.S. government in accordance
with applicable law prior to exporting or transmitting any such technical
data as described above.
18.9 Any changes to this Agreement may only be effected if agreed upon in
writing by duly authorized representatives of the parties hereto. No
agency, partnership, joint venture, or other similar business relationship
shall be or is created by this Agreement.
18.10 This Agreement, including all Product Attachments and Exhibits
constitutes the entire agreement of the parties with respect to the
subject matter hereof.
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
last written below.
NORTHERN TELECOM INC. DELTACOM, INC.
By: /s/ Vickie Yohe By: /s/ Tom Mullis
------------------------------- --------------------------------
(Signature) (Signature)
Name: Vickie Yohe Name: Tom Mullis
----------------------------- ------------------------------
(Print) (Print)
Vice President & General
Title: Manager, Carrier Networks Title: COO
---------------------------- -----------------------------
Date: 24 January 1996 Date: 1/11/96
----------------------------- ------------------------------
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 13
EXHIBIT A
---------
DEFINITIONS
-----------
As used in the Agreement (as defined below), the following initially capitalized
terms shall have the following meanings:
"Affiliate" shall mean Nortel's parent company, Northern Telecom Limited and any
corporation or company effectively controlled directly or indirectly by Northern
Telecom Limited through the ownership or control of shares or other securities
in such corporation or company.
"Agreement" shall mean the Agreement to which this Exhibit is attached, and all
Exhibits and Product Attachments.
"Confidential Information" shall mean all technical or business information,
including, without limitation, specifications, drawings, documentation, know-how
and pricing information, of every kind or description which may be disclosed by
either party (including such information which may be disclosed by an Affiliate)
to the other party in connection with this Agreement, provided the disclosing
party shall clearly mark any such information which is disclosed in writing as
the confidential property of the disclosing party and the disclosing party shall
identify the confidential nature of any such information which it orally
discloses at the time of such disclosure and shall provide a written summary of
the orally disclosed information to the recipient within fifteen (15) days of
such disclosure.
"Equipment" shall mean the hardware listed or otherwise identified in, or
pursuant to, any Product Attachment.
"Exhibits" shall mean this Exhibits A, B, C, and D attached hereto, and any
additional Exhibits which Nortel and Buyer subsequently agree in writing shall
be incorporated into, and made a part of the Agreement by reference.
"Hazardous Materials" shall mean any pollutants, dangerous substances, toxic
substances and/or hazardous substances (including, without limitation, asbestos)
as defined in, or pursuant to, the OSHA Hazard Communication Standard (29 CFR
Part 1910, Subpart Z), the Resource Conservation and Recovery Act of 1976(42 USC
Section 6901, et seq.), the Toxic Substances Control Act (15 USC Section 2601,
et seq.), the Comprehensive Environmental Response Compensation and Liability
Act (42 USC Section 9601, et seq.), and any other federal, state or local
environmental law, ordinance, rule or regulation.
"Order" shall mean a written purchase order issued by Buyer to Nortel. Each
Order shall specify on the face of the Order the types and quantities of
Products and/or Services to be furnished by Nortel pursuant to the Order, the
applicable
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 14
prices, charges and/or fees with respect to such Products and/or Services,
Buyer's facility to which the Products are to be delivered, the delivery and/or
completion schedule, and any other information which may be required to be
included in an Order in accordance with the provisions of this Agreement.
"Product Attachments" shall mean any Product Attachments which the parties agree
in writing shall be incorporated into, and made a part of, this Agreement by
reference.
"Product Attachment Term" shall mean the period specified in a Product
Attachment during which that Product Attachment shall be in effect.
"Product Line" shall mean the Products described in and which may be furnished
pursuant to a specific Product Attachment.
"Products" shall mean any Equipment and/or Software which may be provided
hereunder.
"Service Use" shall mean any use of Products furnished hereunder which is or may
become the subject of a suit, claim or proceeding alleging that a method of use
claim in a patent is infringed, or which may result in a settlement payment, or
award of damages, or accounting of profits, where such payment, award, or
accounting is based on the revenues or profits earned by Buyer or on the lost
revenues or profits of a patent holder or other third party, arising from
Buyer's use of such Products.
"Service Use Limit" shall mean, with respect to a Service Use, an amount which
in the aggregate is equal to three percent (3%) of that portion of the prices,
charges, and fees paid by Buyer to Nortel pursuant to this Agreement for the
portion of the Products directly used by Buyer to effect such Service Use.
"Services" shall mean all services listed or otherwise identified in, or
pursuant to, any Product Attachment and which are associated with the Product
Line described in that Product Attachment, which may be purchased from or
provided by Nortel, such as, but not limited to, engineering, installation,
maintenance, training, provision of documentation, or post-warranty repair or
replacement services.
"Software" shall mean (a) programs in machine-readable code or firmware which
(i) are owned by, or licensed to, Nortel, (ii) reside in Equipment memories,
tapes, disks or other media, and (iii) provide basic logic operating
instructions and user-related application instructions, and (b) documentation
associated with any such programs which may be furnished by Nortel to Buyer from
time to time.
"Specifications" shall mean, with respect to any Product Line, the
specifications identified in the Product Attachment with respect to that Product
Line, provided
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 15
Nortel shall have the right at its sole discretion to modify, change or amend
such specifications at any time.
"Third Party Software Vendor" shall mean any supplier of computer programs
contained in the Software which is not an Affiliate.
"Vendor Items" shall mean, with respect to a Product Line, those portions of the
Product which are identified in the Product Attachment with respect to that
Product Line as Vendor Items.
"Warranty Period" shall mean, with respect to a Product Line, the Warranty
Period specified in the Product Attachment with respect to that Product Line.
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 16
EXHIBIT B
---------
SOFTWARE LICENSE
----------------
1. Buyer acknowledges that the Software may contain computer programs which
have been supplied by, and are proprietary to, Third Party Software
Vendors. In addition to the terms and conditions herein, Buyer shall abide
by any additional terms and conditions provided by Nortel to Buyer with
respect to any Software provided by any Third Party Software Vendor.
2. Upon Buyer's payment to Nortel of the applicable fees with respect to any
Software furnished to Buyer pursuant to this Agreement, Buyer shall be
granted a personal, non-exclusive, paid-up license to use the version of
the Software furnished to Buyer only in conjunction with Buyer's use of the
Equipment with respect to which such Software was furnished for the life of
that Equipment. Notwithstanding the foregoing, Buyer shall be granted no
title or ownership rights to the Software, which rights shall remain in
Nortel or its suppliers.
3. As a condition precedent to this license and to the supply of Software by
Nortel pursuant to the Agreement, Nortel requires Buyer to give proper
assurances to Nortel for the protection of the Software. Accordingly, all
Software supplied by Nortel under the Agreement or any renewals,
extensions, or expansions thereof, or in implementation of any of the
foregoing, shall be treated by Buyer as the exclusive property, and as
proprietary and a TRADE SECRET, of Nortel and/or its suppliers, as
appropriate, and Buyer shall: a) hold the Software, including, without
limitation, any methods or concepts utilized therein in confidence for the
benefit of Nortel and/or its suppliers, as appropriate; b) utilize the
Software solely in conjunction with the Equipment with respect to which
such Software was furnished, as it may be repaired or modified from time to
time; c) not provide or make the Software available to any person except to
its employees on a 'need to know' basis; d) not reproduce, copy, or modify
the Software in whole or in part except as authorized by Nortel; e) not
attempt to decompile, reverse engineer, disassemble, reverse translate, or
in any other manner decode the Software; f) issue adequate instructions to
all persons, and take all actions reasonably necessary to satisfy Buyer's
obligations under this license; and g) forthwith return to Nortel, or with
Nortel's consent destroy, any magnetic tape, disc, semiconductor device or
other memory device or system and/or documentation or other material,
including, but not limited to all printed material furnished by Nortel to
Buyer which shall be replaced, modified or updated.
4. The obligations of Buyer hereunder shall not extend to any information or
data relating to the Software which is now available to the general public
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 17
or becomes available by reason of acts or failures to act not attributable
to Buyer.
5. Buyer shall not assign this license or sublicense any rights herein granted
to any other party without Nortel's prior written consent.
6. Buyer shall indemnify and hold Nortel and its supplier, as appropriate,
harmless from any loss or damage resulting from a breach of this Exhibit
B. The obligations of Buyer under this Exhibit B shall survive the
termination of the Agreement and shall continue if the Software is removed
from service.
<PAGE>
Network Products Purchase Agreement Number DM~11/95-DC
Page 18
EXHIBIT C
---------
STORAGE
-------
If Buyer notifies Nortel prior to the scheduled shipment date of Products that
Buyer does not wish to receive such Products on the date agreed to by the
parties, or the installation site or other delivery location is not prepared in
sufficient time for Nortel to make delivery in accordance with such date, or
Buyer fails to take delivery of any portion of such Products, Nortel may place
the Products in storage. In that event Buyer shall be liable for all additional
costs thereby incurred by Nortel. Delivery by Nortel of any Products to a
storage location as provided above shall be deemed to constitute delivery of the
Products to Buyer for purposes of this Agreement, including, without limitation,
provisions for payment, invoicing, passage of risk of loss, and commencement of
the Warranty Period.
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 19
EXHIBIT D
---------
LIMITED WARRANTIES AND REMEDIES
-------------------------------
1. Nortel warrants that the Equipment supplied hereunder will under normal
use and service be free from defective material and faulty workmanship and
will conform to the applicable Specifications for the Warranty Period
specified in the Product Attachment with respect to such Equipment. The
foregoing warranty shall not apply to items normally consumed in operation,
such as, but not limited to, lamps and fuses or to Vendor Items. Any
installation Services performed by Nortel with respect to such Equipment
shall be free from defects in workmanship for the Warranty Period set forth
in the applicable Product Attachment.
2. Nortel's sole obligation and Buyer's exclusive remedy under the warranty
set forth in Section 1 above shall be limited to the replacement or repair,
at Nortel's option and expense, of the defective Equipment, or correction
of the defective installation Services. Replacement Equipment may be new or
reconditioned at Nortel's option.
3. Nortel warrants that any Software licensed by Nortel to Buyer under this
Agreement shall function during the Warranty Period of the Equipment with
respect to which such Software is furnished without any material, service-
affecting nonconformance to the applicable Specifications, provided that
Buyer shall have paid all Software support fees specified in the applicable
Product Attachment. If the Software fails to so perform, Buyer's sole
remedy and Nortel's sole obligation under this warranty is for Nortel to
correct such failure.
4. Unless otherwise stated in a Product Attachment, (a) Nortel's warranties in
Section 3 above shall only apply to the portion of the Software actually
developed by Nortel or its Affiliates, (b) all other Software shall be
provided by Nortel "AS IS", (c) Nortel shall assign to Buyer on a
nonexclusive basis any warranty on such other Software provided to Nortel
by the developer of such other Software to the extent of Nortel's legal
right to do so.
5. The obligations and remedies set forth in Sections 1,2, and 3 above shall
be conditioned upon: the Equipment not having been altered or repaired, the
Software not having been modified, and the Products not having been
installed outside the United States; any defect or nonconformance not being
the result of mishandling, abuse, misuse, improper storage, improper
performance of installation, other services, maintenance or operation by
other than Nortel (including use in conjunction with any product which is
incompatible with the applicable Equipment or Software or of inferior
performance), and/or any error, act, or omission of Buyer described in
Section 11.4; the Product not having been damaged by fire, explosion, power
failure, power surge, or other power irregularity, lightning, failure to
comply with all applicable environmental requirements for the Products
specified by Nortel or any other applicable
<PAGE>
Network Products Purchase Agreement Number DM-11/95-DC
Page 20
supplier, such as but not limited to temperature or humidity ranges, or any
act of God, nature or public enemy; and written notice of the defect having
been given to Nortel within the applicable Warranty Period.
6. The repair or replacement of Equipment, the correction of defective
installation Services, or the correction of Software pursuant to this
Section shall not extend the applicable Warranty Period except to the
extent specified in the applicable Product Attachment.
7. Upon expiration of the applicable Warranty Period for Equipment furnished
hereunder, repair and replacement Service for such Equipment shall be
available to Buyer from Nortel in accordance with Nortel's then-current
terms, conditions and prices. Such repair and replacement Service and
notice of any discontinuance of such repair and replacement Service shall
be available for a minimum period set forth in the Product Attachment
applicable to such Equipment. This provision shall survive the expiration
of this Agreement.
8. Unless Nortel elects to repair or replace defective Equipment at Buyer's
facility, all Equipment to be repaired or replaced, whether in or out of
warranty, shall be packed by Buyer in accordance with Nortel's instructions
stated in the applicable Product Attachment and shipped at Buyer's expense
and risk of loss to a location designated by Nortel. Replacement Equipment
shall be returned to Buyer at Nortel's expense and risk of loss. Buyer
shall ship the defective Equipment to Nortel within thirty (30) days of
receipt of the replacement Equipment. In the event Nortel fails to receive
such defective Equipment within such thirty (30) day period, Nortel shall
invoice Buyer for the replacement Equipment at the then-current price in
effect therefor.
9. With respect to any Vendor Item furnished by Nortel to Buyer pursuant to
this Agreement, Nortel shall assign to Buyer on a nonexclusive basis any
warranty granted by the party that supplied such Vendor Item to Nortel to
the extent of Nortel's right to do so.
10. Neither Nortel nor Nortel's suppliers, as appropriate, shall have any
responsibility for warranties offered by Buyer to any of its customers.
Buyer shall indemnify Nortel and Nortel's suppliers, as appropriate, with
respect thereto.
<PAGE>
PRODUCT ATTACHMENT
PAGE 1
st7286h
PRODUCT ATTACHMENT
CARRIER NETWORKS PRODUCTS
Northern Telecom Inc.("Nortel") and DeltaCom, Inc.("Buyer") agree as follows:
1. INCORPORATION BY REFERENCE
--------------------------
This Product Attachment shall be incorporated into and made a part of
Network Products Purchase Agreement No. DM-11/95-DC ("Agreement") between
Nortel and Buyer.
2. DEFINITIONS
-----------
For purposes of this Product Attachment:
"Acceptance Criteria" shall mean, with respect to any Products installed by
Nortel hereunder, the standards and specifications contained in the Nortel
Installation Manuals which are applicable to such Products.
"Equipment" shall mean the equipment listed in Schedule A.
"Extension" shall mean Equipment and/or Software, identified in Schedule A,
which Nortel engineers and installs and which is added to an Initial System
after the Turnover Date of the Initial System.
"Initial System" shall mean the Equipment and Software which is included
in any configuration identified in Schedule A as an "Initial System."
"Installation Site" shall mean Buyer's facility identified in an Order to
which the applicable Products identified in such Order shall be delivered
or at which the applicable Services, if any, are to be performed,
respectively.
"Merchandise" shall mean any Equipment which is not part of a System and
with respect to which no engineering or installation Services shall be
provided by Nortel.
"Product Attachment Term" shall mean the period which shall commence on
the date this Product Attachment is executed by the latter of the parties
and shall expire twenty-four (24) months thereafter.
"Services" shall mean the services described in Schedule B.
"Software" shall mean the software listed in Schedule A.
<PAGE>
PRODUCT ATTACHMENT
PAGE 2
"Specifications" shall mean with respect to any Products furnished
hereunder, the specifications published by Nortel which Nortel identifies
as its standard performance specifications for such Products as of the date
of Buyer's Order for such Products.
"System" shall mean any Initial System or Extension.
"Turnover Date " shall mean, with respect to any Products installed by
Nortel hereunder, the date on which Nortel provides the Turnover Notice to
Buyer pursuant to Section 7.a. of this Product Attachment.
"Warranty Period" shall mean, with respect to:
(a) Any System, the period which shall commence upon the Turnover Date
with respect to such System and shall expire twelve (12) months
thereafter,
(b) Merchandise, the period which shall commence upon the date of shipment
with respect to such Merchandise by Nortel to Buyer and shall expire
ninety(90) days thereafter,
(c) Installation Services involving any System, the period which shall
commence upon the Turnover Date with respect to such System and shall
expire twelve (12) months thereafter,
(d) Equipment which is repaired or replaced pursuant to Nortel's
obligations under Exhibit D to the Agreement, the period commencing
five (5) days after (i) shipment of the replacement Equipment to Buyer
or (ii) completion of the repair at the Installation Site of the
applicable Equipment and which shall expire on the later of thirty
(30) days thereafter or the last day of the original Warranty Period
with respect to the Equipment which was repaired or replaced, and
(e) Software which was corrected pursuant to Nortel's obligations under
Exhibit D to the Agreement, the period commencing upon delivery of the
corrected Software by Nortel to Buyer and expiring on the later of
thirty (30) days thereafter or the last day of the original Warranty
Period with respect to such Software.
3. SCHEDULES
---------
The following Schedules which are attached hereto are an integral part of
the Product Attachment and are incorporated herein by reference:
<PAGE>
PRODUCT ATTACHMENT
PAGE 3
Schedule A - Products, Prices, and Fees
Schedule B - Services and Charges
Schedule C - Delivery
Schedule D - Documentation
4. ORDERING
--------
With respect to Section 3, ORDERING of the Agreement the following
additional terms shall apply:
a. Buyer shall identify in each Order for Products whether the Products
constitute an Initial System, Extension, or Merchandise. Except for the
prices, charges and/or fees set forth in Schedule A to this Product
Attachment, all Orders for Extensions, Merchandise, or any Services other
than engineering and installation Services provided by Nortel in connection
with an Order for an Initial System shall be subject to written agreement
of Buyer and Nortel on the applicable prices, charges and fees with
respect thereto as required pursuant to Section 5, PRICING, of this Product
Attachment.
b. Notwithstanding Exhibit C to the Agreement, Buyer may by written notice to
Nortel cancel without charge any Order for Products and/or Services prior
to the delivery date of the applicable Products set forth in such Order or
the agreed date for the commencement by Nortel of the applicable Services
("Service Commencement Date"), except that if Buyer cancels such Order
within six (6) weeks or less of any such date, a cancellation fee of
fifteen percent (15%) of the aggregate price of all Products and/or
Services being cancelled in such Order shall be payable by Buyer. Nortel
may invoice such amount upon receipt of Buyer's notice of cancellation of
the Order.
c. Notwithstanding Exhibit C to the Agreement, Buyer may by written notice to
Nortel not less than six (6) weeks prior to the delivery date of any
Products set forth in an Order and/or the Service Commencement Date of the
applicable Services, delay the delivery date of such Products and/or the
Service Commencement Date of such Services for a period which shall not
exceed ninety (90) days from the date such Products were originally
scheduled to be delivered or ninety (90) days from the Service Commencement
Date, subject to the availability from Nortel of the applicable Products
and/or Services after such period of delay.
d. Except as set forth in Sections 4.b. and 4.c. of this Product
Attachment,any change to an Order after Nortel's acceptance of such Order
shall require written agreement of Nortel and Buyer upon a written change
to the Order ("Change Order") which shall reference the original Order and
be executed by the parties. No such changes shall be implemented until the
applicable Change Order has been executed by the parties.
<PAGE>
PRODUCT ATTACHMENT
PAGE 4
e. With respect to each Order for Products which is accepted by Nortel, Buyer
may make a written request at least ninety (90) days prior to the scheduled
shipment date of such Products for a change ("Change") consisting of
certain addition(s) or deletion(s) to such Products. After receipt of such
request, Nortel shall submit a Job Change Order ("JCO") to Buyer for
Buyer's approval with respect to the requested Change, except that Nortel
shall be under no obligation to submit such JCO to Buyer if Nortel
determines that the Price applicable to such Order would be reduced by more
than ten percent (10%) as a result of the implementation of the Change.
Each JCO shall state whether the requested Change shall increase or
decrease the Price and/or time required by Nortel for any aspect of its
performance under the Agreement with respect to such Order. Buyer shall
accept or reject the JCO in writing ten (10) days of receipt thereof.
Failure of the Buyer to accept or reject the JCO in writing as described
above shall be deemed a rejection of the JCO by Buyer. In the event an
accepted JCO involves the return to Nortel of any Equipment which shall
have been previously delivered to Buyer, Nortel may involve and Buyer shall
pay the transportation costs and Nortel's then-current restocking charge
for the returned Equipment.
f. Any increase or decrease in the Price with respect to an Order hereunder
which is occasioned by an accepted JCO shall be added to or subtracted
from, as applicable, the amount of the last payment due pursuant to Section
6 with respect to such Order.
g. If Buyer rejects a proposed JCO, then the rights and obligations of the
parties with respect to the applicable Order shall not be subject to
Buyer's requested Changes, provided that Buyer shall promptly pay to Nortel
all of Nortel's additional and reasonable costs and expenses incurred
hereunder in accordance with Buyer's requested Changes and Nortel's
additional and reasonable costs and expenses subsequently incurred in order
that Nortel may be able to perform Nortel's obligations without
modification by the requested Changes, and Nortel shall be entitled to an
extension of the dates for performance of its obligations with respect to
the applicable Order as a result of any delays in such performance which
result from the foregoing.
5. PRICING
-------
With respect to Section 4, PRICES of the Agreement, the following
additional terms apply:
a. The prices set forth in Schedule A with respect to any Initial System
and/or Extension shall be in effect for the Product Attachment Term. Nortel
may in its sole discretion, thereafter, increase any prices set forth in
Schedule A upon sixty (60) days prior written notice to Buyer. The prices
listed in Schedule A shall apply to any Order for an Initial System and/or
Extension listed in Schedule A
<PAGE>
PRODUCT ATTACHMENT
PAGE 5
which shall be received by Nortel prior to the effective date of any change
in such prices as permitted by this Section, provided that delivery date
for such Initial System and/or Extension as set forth in the applicable
Order shall be not more than one-hundred twenty (120) days after Nortel's
acceptance of such Orders.
b. Except for the prices, charges and/or fees set forth in Schedule A, the
prices for Equipment and the fees for the right to use the Software
included in any Extension, prices for any Merchandise, and charges for any
Services, other than engineering and installation Services provided with
any Initial System and/or Extension shall be as subsequently agreed in
writing by Nortel and Buyer.
c. Notwithstanding anything to the contrary in the Agreement, shipment of the
Products to Buyer shall be F.O.B. Buyer's Installation Site.
d. During the Product Attachment Term, Buyer shall issue an Order or Orders
for a DTEI Extension with seven thousand six hundred eighty (7680) fully
wired and fully equipped ports (Purchase Commitment"). The price for each
such port is set forth in Schedule A, Section 1.2 (a) The number of ports
set forth on any given Order may be less that seven thousand six hundred
eighty (7680), provided that the number of ports set forth on any given
Order shall be in minimum increments of nine hundred sixty (960). In order
to qualify for the per port prices set forth in Schedule A, Section 1.2
(a), Buyer shall issue an Order or Orders for the total number of ports
included in the Purchase Commitment no later than thirty (30) days prior to
the expiration of the Product Attachment Term.
In the event Buyer has not issued an Order or Orders for the total number
of ports set forth in the Purchase Commitment by the thirtieth day prior to
the expiration of the Product Attachment Term, then the price per port for
each port ordered by Buyer prior to that time shall be as set forth in
Schedule A, Section 1.2 (b). Within thirty (30) days after expiration of
the Product Attachment Term, Nortel shall prepare an adjustment invoice for
the difference between the per port prices set forth in Schedule A, Section
1.2 (a) theretofore invoiced to Buyer, based upon the assumption that it
would timely satisfy the Purchase Commitment, and the per port prices set
forth in Schedule A, Section 1.2 (b) multiplied by the number of ports
ordered by Buyer prior to that time. Buyer shall pay the amount of the
adjustment invoice within thirty (30) days of the date thereof. Any Order
issued by Buyer during the thirty (30) day period prior to the expiration
of the Product Attachment Term shall be at the per port prices set forth in
Schedule A, Section 1.2 (b), regardless of the number of ports theretofore
ordered by Buyer; and any Order issued thereafter shall be at prices which
shall be agreed upon.
<PAGE>
PRODUCT ATTACHMENT
PAGE 6
6. TERMS OF PAYMENT
----------------
With respect to Section 5, TERMS OF PAYMENT, the following additional terms
shall apply:
a. With respect to each Initial System furnished hereunder by Nortel to Buyer
the price listed in Schedule A shall be invoiced by Nortel in accordance
with the following schedule:
(i) Twenty percent (20%) of such price may be invoiced upon Nortel's
acceptance of the Order for such Initial System,
(ii) Fifty percent (50%) of such price may be invoiced on the date of
shipment by Nortel to Buyer of the switch component of such Initial
System,
(iii) Twenty percent (20%) of such price may be invoiced on the Turnover
Date of such Initial System, and
(iv) Ten percent (10%) of such price may be invoiced on the date of
Acceptance of such Initial System.
b. With respect to each Extension furnished hereunder by Nortel to Buyer, the
applicable price determined in accordance with Section 5.b. of this Product
Attachment shall be invoiced by Nortel in accordance with the following
schedule:
(i) Twenty percent (20%) of such price may be invoiced upon Nortel's
acceptance of the Order for such Extension,
(ii) Seventy percent (70%) of such price may be invoiced on the date of
delivery by Nortel to Buyer of the Equipment included in such
Extension, and
(iii) Ten percent (10%) of such price may be invoiced on the date of
Acceptance of such Extension.
c. Except as may be otherwise agreed in writing by the parties Nortel's prices
for Merchandise and charges for any Services determined in accordance with
Section 5.b. above may be respectively invoiced upon delivery of such
Merchandise and upon performance of such Services by Nortel.
<PAGE>
PRODUCT ATTACHMENT
PAGE 7
7. TESTING TURNOVER, AND ACCEPTANCE
--------------------------------
Pursuant to Section 8.1 of the Agreement, the rights and obligations of the
parties with respect to testing, turnover and acceptance of any Products
furnished hereunder and installed by Nortel shall be as follows:
a. Nortel shall provide Buyer with five (5) business days written notice prior
to commencing final commissioning and testing of any Products installed by
Nortel. Buyer shall cause an authorized representative of Buyer to be
present at the applicable Installation Site to witness such final
commissioning and testing, provided that in the event such representative
fails to be present for any reason, Nortel shall not be required to delay
performance of such final commissioning and testing. In connection with the
final commissioning and testing of such Products, Nortel shall test the
Products for conformity with the applicable Acceptance Criteria. When such
tests have been successfully completed, Nortel shall provide Buyer with
written notice ("Turnover Notice") that the applicable Products meet such
Acceptance Criteria and are ready for Buyer's testing for compliance with
such Acceptance Criteria. Buyer shall promptly complete and return to
Nortel Buyer's acknowledgment of receipt of such Turnover Notice.
b. Following the Turnover Date, Buyer may test the applicable Products for
compliance with the Acceptance Criteria using the tests and test procedures
contained in Nortel's Installation Manuals with respect to such Products.
Within fifteen (15) days following the Turnover Date of the applicable
Products, Buyer shall notify Nortel either that Buyer has accepted such
Products in writing using Nortel's standard Acceptance Notice form or that
Buyer has not accepted such Products in which case Buyer shall also provide
Nortel with a written notice ("Notice of Deficiency") which shall provide
in reasonable detail the manner in which Buyer asserts that the Products
failed to meet the Acceptance Criteria. With respect to any such details
with which Nortel agrees, Nortel shall promptly proceed to take appropriate
corrective action and following correction, Buyer may retest the Products
in accordance with this Section. Buyer shall accept the Products in writing
without delay when the tests pursuant to this Section indicate that the
Products comply with the Acceptance Criteria.
c. With respect to any points of disagreement between Nortel and Buyer
concerning any Notice of Deficiency which are not resolved by Nortel and
Buyer within ten (10) days after the effective date of the Notice of
Deficiency, Buyer, at its option, may waive any rights it may have on
account of any such points of disagreement, or require that the disputed
points be resolved by arbitration.
d. Buyer shall notify Nortel in writing of its election pursuant to Section
7.c. not later than ten (10) days after the effective date of the Notice
of Deficiency, if any, given to Nortel by Buyer. Upon expiration of such
ten (10) day period unless Buyer has notified Nortel to the contrary, Buyer
shall be deemed to have elected
<PAGE>
PRODUCT ATTACHMENT
PAGE 8
to waive its right with respect to any points of disagreement then existing
between it and Nortel with respect to such Notice of Deficiency.
e. If Buyer makes timely election to require arbitration of such disputed
points, the arbitrator shall be chosen by mutual agreement. If the parties
cannot agree upon an arbitrator within three (3) business days of Buyer's
election to arbitrate, each party shall within three (3) business days
thereafter select an independent and an unaffiliated person to be an
arbitrator. These two (2) persons selected shall select a third person,
independent and unaffiliated with either party, as a third arbitrator. The
arbitration shall be conducted in accordance with the Rules of the American
Arbitration Association, provided, however that the Arbitrator(s) shall be
empowered to reduce the Prices of Products only to the extent that the
Arbitrator(s) find that the benefit of Buyer's bargain has been reduced.
The Arbitrator(s) shall not have any authority to grant partial or total
rescission unless the Arbitrator(s) determine that (i) Buyer has not
substantially received the benefit of its bargain; and (ii) money damages
will not provide an adequate remedy. Judgment upon the award rendered by
the Arbitrator(s) may be entered in any Court of competent jurisdiction.
f. For purposes of this Product Attachment, "Acceptance" of the applicable
Products shall occur upon the earliest of the following and Buyer shall
upon request sign Nortel's Acceptance Notice confirming such Acceptance
without any conditions, restrictions, or limitations of any nature
whatsoever:
(i) The date on which Buyer accepts such Products pursuant to Section
7.b. of this Product Attachment;
(ii) The failure of Buyer to provide Nortel with any notice required by
Section 7.b. of this Product Attachment, with respect to such
Products;
(iii) Use by Buyer of such Products or any portion thereof in revenue-
producing service at any time; or
(iv) Waiver by Buyer of its rights pursuant to Section 7.c. or 7.d.
g. Acceptance by Buyer of such Products pursuant to Section 7.f. of this
Product Attachment above shall not be withheld or postponed due to.
(i) Deficiencies of such Products resulting from causes not attributable
to Nortel, such as, but not limited to (A) inaccuracy of information
provided by Buyer, (B) inadequacy or deficiencies of any materials,
facilities or services provided directly or indirectly by Buyer and
tested in conjunction with the applicable Products, (C) other
conditions external to the Products which are beyond the limits
specified by Nortel in the Specifications for the Products and which
are used by Nortel in performance calculations
<PAGE>
PRODUCT ATTACHMENT
PAGE 9
with respect to the Acceptance Criteria, or (D) spurious outputs from
adjacent material; or
(ii) Minor deficiencies or shortages with respect to such Products which
are attributable to Nortel, but of a nature that do not prevent full
and efficient operation of the Products.
h. With respect to any deficiencies of the type described in Section 7.g.(i),
Nortel shall at Buyer's request and expense assist Buyer in the elimination
or minimization of any such deficiencies. With respect to any deficiencies
or shortages as described in the Section 7.g.(ii), Nortel shall, at
Nortel's expense, take prompt and effective action to correct any such
deficiencies or shortages.
i. In the event Buyer's Acceptance of any Products is withheld or postponed
due to any deficiencies of the type described in Section 7.g.(i), Nortel
shall invoice and Buyer shall pay Nortel's charges and reasonable expenses
incurred by Nortel associated with Nortel's investigation of the reasons
for Buyer's withholding or postponement of such Acceptance.
8. WARRANTIES AND REMEDIES
-----------------------
With respect to Exhibit D, LIMITED WARRANTIES AND REMEDIES, the following
additional terms shall apply:
a. Except as set forth in Section 8.b. below, Nortel shall in performance of
its obligations under Section 2 of Exhibit D to the Agreement, (i) ship
replacement Equipment or complete the repair within thirty (30) days of
Nortel's receipt of the Equipment to be replaced or repaired, and (ii)
commence the correction of the applicable installation Services within
thirty (30) days of receipt of notice from Buyer pursuant to Section 5 of
Exhibit D to the Agreement.
b. For emergency warranty service situations involving the Equipment, Nortel
shall during the applicable Warranty Period use all reasonable efforts to
ship replacement Equipment within twenty-four (24) hours of notification of
the applicable warranty defect by Buyer pursuant to Section 5 of Exhibit D
to the Agreement, provided that Buyer shall have requested such emergency
service. Nortel may invoice Buyer and Buyer shall pay Nortel's standard
fifty dollar ($50) surcharge for emergency warranty services. If Nortel
determines that due to the particular circumstances, onsite technical
assistance is necessary, Nortel shall use all reasonable efforts to
dispatch emergency service personnel to the applicable Installation Site
within twenty-four (24) hours of receipt of notice from Buyer as described
above.
<PAGE>
PRODUCT ATTACHMENT
PAGE 10
c. All Products to be repaired or replaced, both within and outside of the
applicable Warranty Period, shall be packed by Buyer in accordance with
Nortel's then-current instructions.
d. No later than ninety (90) days prior to the expiration of the Warranty
Period with respect to any Initial System, Nortel shall offer to Buyer
post-warranty support by means of an extended service plan or other terms,
provided that neither party shall have any obligation with respect thereto
except as may be agreed upon in writing by the parites.
9. NOTICES
-------
Pursuant to Section 18.5 of the Agreement, any notices by Buyer to Nortel
which are specific to this Product Attachment shall be delivered to the
following address:
Northern Telecom Inc.
2221 Lakeside Blvd.
Richardson, Texas 75082-4399
Attn: Vice President, Carrier Networks
10. ADDITIONAL TERMS
----------------
The following additional terms shall apply to the Agreement:
(a) With respect to Section 4, ORDERING, the following additional terms shall
apply:
In order to assist Buyer in preparing an Order, Nortel shall
provide to Buyer a written estimate/projection of the anticipated
delivery, installation, turnover and acceptance schedule which
estimate/ projection shall be subject to mutual agreement.
(b) With respect to Section 14, BUYER'S RESPONSIBILITIES, the following
additional terms shall apply:
(14.6) Buyer shall be responsible for ordering and coordinating with
each applicable local telephone company the installation of all
central office trunks and test trunks and Buyer shall be
responsible for all utility charges associated with the
installation, testing, operation and maintenance of Products
furnished hereunder, including, but not limited to, all
applicable charges for such central office trunks, test trunks
and any tie lines.
(c) Nortel shall provide documentation with respect to the Products in
accordance with Schedule D to this Product Attachment.
<PAGE>
PRODUCT ATTACHMENT
PAGE 11
(d) Buyer hereby represents and warrants that it:
(i) was formerly known as, and is the successor in interest to, Southern
Interexchange Services, Inc.;
(ii) owns the DMS-250 System to which the DTEI Extension described in
Schedule A will be added;
(iii) shall use the DMS-250 System and the DTEI Extension, solely for the
purposes of providing telecommunications services to its subscribers; and
(iv) does not intend to resell the DMS-250 System or DTEI Extension,
unless it does so as part of a sale of all or substantially all of its
assets; and
(v) shall abide for the benefit of Nortel by all the terms and
conditions of the Software License contained in Exhibit B of the Agreement.
11. AMENDMENTS TO THE AGREEMENT
---------------------------
11.1 Solely for the purposes of this Product Attachment, certain provisions of
the Agreement shall be amended as follows:
a. Section 1.2 of Section 1, SCOPE of the Agreement is hereby amended to read:
The terms and conditions of this Agreement shall apply to the purchase by
Buyer and the sale by Nortel of Equipment and Services and the licensing of
Software furnished in connection with such Equipment which occur after the
date of last signature placed upon this Agreement and the corresponding
Product Attachments referenced in this Agreement. The terms and conditions
contained in a Product Attachment shall modify and/or supplement the other
terms and conditions of this Agreement, only with respect to the Product
Line and Services described in the Product Attachment.
b. Section 4.2 of Section 4 PRICES, of the Agreement is hereby amended to
read:
Until the total of all prices, charges and fees for Products and related
Services furnished hereunder shall have been paid to Nortel, Buyer shall
not sell, lease or otherwise transfer such Products or any portion thereof
or allow any liens or encumbrances to attach to such Products or any
portion thereof prior to payment in full to Nortel of the total of all such
prices, charges, and fees.
c. Section 6, TAXES, of the Agreement is hereby amended to read:
Buyer shall at Nortel's direction promptly reimburse Nortel or pay directly
to the applicable government or taxing authority all taxes and charges
arising hereunder, including, without limitation, penalties and interest
arising from an
<PAGE>
PRODUCTS ATTACHMENT
PAGE 13
act or omission of Buyer, except for taxes computed upon the net income of
Nortel. Buyer's obligations pursuant to this Section 6 survive any
termination of this Agreement.
d. Sections 8.2 and 8.3, of Section 8, TESTING, TURNOVER AND ACCEPTANCE, of
the Agreement are hereby amended to read:
8.2 If Nortel does not install Products furnished hereunder, Nortel
shall prior to delivery of the Products perform such factory tests as
Nortel determines to be appropriate in order to confirm that such Products
shall be in accordance with the applicable Specifications. Buyer shall
deemed to have accepted the Products upon successful completion of such
tests.
8.3 In the event that Buyer places Products into revenue-generating
service, such Products shall be deemed to have been accepted by Buyer
without limitation or restriction.
e. Section 13.3, of Section 13, CONFIDENTIAL INFORMATION, of the Agreement is
hereby amended to read:
Nortel shall take reasonable care to use Buyer's Confidential Information
only to perform Nortel's obligations to provide Products and/or Services to
Buyer, provided Nortel may use any of Buyer's Confidential Information for
the development, manufacture, marketing and maintenance of new products
and/or services and/or changes or modifications to the existing Products
and/or Services, which Nortel may, in either case, provide the new and or
modified Products or Services to third parties without restriction.
f. Section 14.1 and 14.3, of Section 14, BUYER'S RESPONSIBILITIES, of the
Agreement are hereby amended to read:
All sites at which the Products shall be delivered or installed shall be
prepared by Buyer in accordance with Nortel's standards for the safe
installation, operation and/or maintenance of Equipment, including without
limitation, Equipment environmental requirement which are the same or
similar to that of installed Nortel Equipment at Buyer's site(s), as the
date of execution of this Products Attachment.
Buyer shall provide reasonable working space and facilities, including
heat, light, ventilation, telephones, electrical current, trash removal and
other necessary utilities for use by Nortel-designated maintenance
personnel, and adequate secure storage space, if required by Nortel, for
Products and materials. Buyer shall also provide reasonable and adequate
security for the Products while on Buyer's site.
<PAGE>
PRODUCT ATTACHMENT
PAGE 13
g. Sections 18.3 and 18.6, of Section 18, GENERAL, of the Agreement are hereby
amended to read:
18.3 The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of Alabama, except for its rules
with respect to the conflict of laws.
18.6 In the event of a conflict between the provisions of this Agreement
which are not contained in a Product Attachment and the provisions of a
Product Attachment, the provisions of the Product Attachment shall prevail.
h. The definition of Specifications as set forth in Exhibit A to the Agreement
shall be amended to read as follows:
"Specifications" shall mean, with respect to any Product Line, the
specifications identified in the Product Attachment with respect to that
Product Line, provided Nortel shall have the right at its sole discretion
to modify, change or amend such specifications at any time prior to the
date of acceptance by Nortel of Buyer's Order.
i. Section 6 to the SOFTWARE LICENSE, as set forth in Exhibit B to the
Agreement shall be amended to read as follows:
Buyer shall indemnify and hold Nortel and its supplier, as appropriate,
harmless from any loss or damage resulting from a breach of this Exhibit B
by Buyer. The obligations of Buyer under this Exhibit B shall survive the
termination of the Agreement and shall continue if the Software is removed
from service.
j. STORAGE provisions, as set forth in Exhibit C to the Agreement shall be
amended to read as follows:
If Buyer notifies Nortel prior to the scheduled shipment date of Products
that Buyer does not wish to receive such Products on the date agreed to by
the parties, or the installation site or other delivery location is not
prepared in sufficient time for Nortel to make delivery in accordance with
such date, or Buyer fails to take delivery of any portion of such Products,
Nortel may place the Products in storage, at a mutually agreed upon
facility, upon the expiration of thirty (30) days from the date of the
previously scheduled shipment date. In that event Buyer shall be liable for
all additional and reasonable costs thereby incurred by Nortel. Delivery by
Nortel of any Products to a storage location as provided above shall be
deemed to constitute delivery of the Products to Buyer for purposes of this
Agreement, including, without limitation, provisions for payment,
invoicing, passage of risk of loss, and commencement of the Warranty
Period.
<PAGE>
PRODUCT ATTACHMENT
PAGE 14
K. Section 2 and 8 to the LIMITED WARRANTIES AND REMEDIES provisions, as
set forth in Exhibit D to the Agreement shall be amended to read as
follows:
2. Nortel's sole obligation and Buyer's exclusive remedy under the
warranty set forth in Section 1 above shall be limited to the replacement
or repair, at Nortel's option and expense, of the defective Equipment, or
correction of the defective installation Services. Replacement Equipment
may be new or reconditioned at Nortel's option, but in any event
functionally equivalent to the defective equipment in all material
respects.
8. Unless Nortel elects to repair or replace defective Equipment at
Buyer's facility, all Equipment to be repaired or replaced, whether in
or out of warranty, shall be packed by Buyer in accordance with Nortel's
instructions stated in the applicable Product Attachment and shipped at
Buyer's expense and risk of loss to a location designated by Nortel.
Replacement Equipment shall be returned to Buyer at Nortel's expense
and risk of loss. Buyer shall ship the defective Equipment to Nortel
within thirty (30) days of receipt of the replacement Equipment.
In the event Nortel fails to receive such defective Equipment within
such thirty (30) days period due to an intentional act of the Buyer,
Nortel shall invoice Buyer for the replacement Equipment at the then
-current price in effect therefor.
NORTHERN TELECOM INC. DELTACOM, INC.
BY:/s/ Vickie Yohe BY:/s/ Tom Mullis
------------------------------ ---------------------------
(Signature) (Signature)
Name: Vickie Yohe Name: Tom Mullis
---------------------------- -------------------------
(Print) (Print)
Vice President & General
Title: Manager, Carrier Networks Title: CEO
--------------------------- ------------------------
Date: 24 January 1996 Date: 1/11/96
--------------------------- ------------------------
<PAGE>
PRODUCT ATTACHMENT
PAGE 15
SCHEDULE A
----------
PRODUCTS, PRICES AND FEES
-------------------------
The following pages detail the contents of Schedule A.
<PAGE>
DELTACOM PRODUCTS AND PRICING ATTACHMENT
SCHEDULE A
SCHEDULE A
I. EXTENSION PORTS
(DMS-250 SWITCHING SYSTEM)
1.0 PORT EXTENSIONS
1.1 FULLY WIRED AND FULLY EQUIPPED DTEI PORT EXTENSION ("DTEI EXTENSION")
The price for a DTEI Extension includes the following. Each DTEI
Extension is configured in minimum increments of nine hundred sixty
(960) ports, and is configured for SS7/PTS or ISDN signaling at
Buyer's request:
a) DTEI equipment and XPM+, or then current common control;
b) Buyer shall indicate in its Order either UTR, STR, CTD for DTCs
configured for SS7 or PTS capability; or UTR and ISDN pre-
processor circuit packs configured for ISDN PRI capability;
c) As required ENET/JNET, MS or processor memory extensions;
d) As required DMS-250 Service/Test Circuits to support the DTEI
Extension;
e) Power Distribution Center (PDC) equipment as required to support
the DTEI Extension;
f) Spare circuit packs, if required and deemed necessary by Nortel,
based on Nortel's standard engineering sparing guidelines.
1.2 FULLY WIRED AND FULLY EQUIPPED DTEI PORT EXTENSIONS PRICES
a) A DTEI Extension must be ordered in minimum increments of nine
hundred sixty (960) ports. In accordance with Section 5.d of the
Product Attachment, if Buyer issues an Order or Orders prior to
the thirtieth day prior to the expiration of the Product
Attachment Term for a total of at least seven thousand six
hundred eighty (7680) fully wired and fully equipped ports, then
the price per port shall be one hundred ninety dollars ($190).
b) If Buyer fails to issue an Order or Orders prior to the
thirtieth day prior to the expiration of the Product Attachment
Term for at least seven thousand six hundred eighty (7680) fully
wired and fully equipped ports in accordance with Section 5.d of
the Product Attachment, in minimum increments of nine hundred
sixty (960) ports, then the price per port shall be two hundred
thirty dollars ($230).
SCHEDULE A: DMS-250 SWITCHING SYSTEM
SECTION 1: FULLY WIRED AND FULLY EQUIPPED DTEI EXTENSIONS
1
<PAGE>
DeltaComm Products and Pricing Attachment
Schedule A
SCHEDULE A
I. EXTENSION PORTS
(DMS-250 SWITCHING SYSTEM)
2.0 Optional DTEI Equipment
2.1 Dialable Wideband
Buyer may order two (2) NTAX78AA circuit packs per DTC in place of
the standard time switch circuit packs provided with a DTEI
Extension for an additional price of five thousand dollars ($5,000)
per each DTC or ten thousand dollars ($10,000) per each DTEI
frame.
2.2 Echo Cancellation
Buyer may order an upgrade from the NT6X50AB to the NT6X50EC
circuit pack for an additional price of three thousand three
hundred sixty dollars ($3,360) per circuit pack, in addition to the
price for the NT6X50AB circuit pack.
Appendix A: DMS-250 Switching System
Section 2: Optional DTEI Equipment 2
<PAGE>
PRODUCT ATTACHMENT
PAGE 16
SCHEDULE B
----------
SERVICES AND CHARGES
--------------------
ENGINEERING
- -----------
1. Nortel shall engineer each Initial System and/or Extension furnished
hereunder in accordance with Nortel's engineering practices to such Initial
System and/or Extension at the time such engineering is performed.
2. Nortel's charges for engineering each Initial System and/or Extension are
included in the prices and fees for the Initial System and/or Extension set
forth in Schedule A.
3. The provision of any other engineering by Nortel and the charges associated
therewith shall be as subsequently agreed in writing by Nortel and Buyer.
INSTALLATION
- ------------
1. Nortel shall install each Initial System and/or Extension furnished
hereunder at the applicable Installation Site in accordance with Nortel's
installation practices applicable to such Initial System and/or Extension
at the time such installation is performed.
2. Nortel's charges for performance of such installation are included in the
prices and fees for the Initial System and/or Extension set forth in
Schedule A.
3. The provision of any other installation by Nortel and the charges
associated therewith shall be as subsequently agreed in writing by Nortel
and Buyer.
TRAINING
- --------
1. With each Initial System and/or DTEI Extension ordered hereunder, Nortel
shall make available to Buyer at Nortel's then current charges training
training requested by Buyer, if then currently available. Any such training
shall be delivered at Nortel's Training Center currently located in
Raleigh, North Carolina. Such training shall be in any of the courses
scheduled to be provided at that Training Center as set forth in Nortel's
applicable Technical Training Course catalog with respect to the Products
described in Schedule A to this Product Attachment.
2. Buyer shall be responsible for the payment of all travel and living
expenses of its employees whom Buyer sends to receive such training.
<PAGE>
PRODUCT ATTACHMENT
PAGE 17
3. Additional Training in such courses shall be provided by Nortel to Buyer
subject to availability and scheduling of such courses. Nortel may change
the schedule of such courses at any time. Such additional training shall
be provided at Nortel's then-current charges.
4. All training provided by Nortel shall consist of such materials and cover
such subject as Nortel in its sole discretion determines to be appropriate.
Nortel makes no representation concerning the ability of anyone to
satisfactorily complete any training.
5. Nortel may add to, or delete from, the subject matter and or medium of any
of the training courses which Nortel provides. In addition, Nortel may
reschedule such courses as Nortel determines to be appropriate.
6. The availability of any training to Buyer as set forth above shall be
subject to any prerequisites identified by Nortel in its training catalog
or other documentation with respect to such training.
ADDITIONAL SERVICES
- -------------------
1. All other services to be furnished hereunder shall be subject to written
agreement of the parties which shall set forth the terms and conditions
applicable to the provision of such services and a description of such
services and the charges for such services.
<PAGE>
PRODUCT ATTACHMENT
PAGE 18
SCHEDULE C
----------
DELIVERY
--------
Delivery for all Product ordered hereunder shall be stated upon Buyer's purchase
order reflecting the mutual agreement of the parties.
<PAGE>
PRODUCT ATTACHMENT
PAGE 19
SCHEDULE D
----------
DOCUMENTATION
-------------
Certain documentation with respect to the Products may be made available to
Buyer on CD-ROM pursuant to the terms and conditions set forth below.
In addition, Nortel may furnish to Buyer such other documentation with respect
to the Products as Nortel deems appropriate.
HELMSMAN TERMS AND CONDITIONS
1. DEFINITIONS
"CD-ROM" shall mean a compact disk with read-only memory.
"CD-ROM Software" shall mean the computer programs which provide basic logic,
operating instructions or user-related application instructions with respect to
the retrieval of CD-ROM Documentation, along with the documentation used to
describe, maintain and use such computer programs.
"CD-ROM Documentation" shall mean the documentation that Nortel makes available
to its customers on CD-ROM with respect to DMS-250, DMS-300, and/or DMS-STP
Systems.
2. SCOPE
With the delivery of each Initial System ordered by Buyer, Nortel shall deliver
a CD-ROM on which the appropriate CD-ROM Documentation is contained and a user
manual which shall set forth the procedures by which Buyer may use the CD-ROM
SOftware to access to the CD-ROM Documentation.
Buyer shall be solely responsible for obtaining, at its cost and expense, any
computer or other equipment and software required to use the CD-ROM, CD-ROM
Software and/or CD-ROM Documentation.
Buyer may order additional CD-ROMs from Nortel at Nortel's then current fees
therefor, and any such additional CD-ROMs shall be subject to these terms and
conditions.
3. LICENSE
Upon delivery of the CD-ROM, Nortel shall grant to Buyer a non-exclusive,
non-transferable and non-assignable license, subject to these terms and
conditions:
<PAGE>
PRODUCT ATTACHMENT
PAGE 20
(a) to use CD-ROM Software solely to access to the CD-ROM Documentation; and
(b) to use the CD-ROM Documentation solely to operate and maintain the Initial
System with which it was delivered.
Buyer acknowledges that, as between Nortel and Buyer, Nortel retains title to
and all other rights and interest in the CD-ROM Software and CD-ROM
Documentation. Buyer shall not modify, translate or copy the CD-ROM Software or
CD-ROM Documentation without Nortel's prior written consent. Buyer shall hold
secret and not disclose to any person, except Buyer's employees with a need to
know, any of the CD-ROM Software or CD-ROM Documentation.
Buyer shall not sell, license, reproduce or otherwise convey or directly or
indirectly allow access to the CD-ROM Software or CD-ROM Documentation to any
other person, firm, corporation or other entity.
Except to the extent expressly set forth in this Schedule D, Nortel shall have
no obligations of any nature whatsoever with respect to the CD-ROM Software or
the CD-Rom Documentation.
4. DISCLAIMER OF WARRANTY AND LIABILITY
NORTEL MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY NATURE WHATSOEVER WITH
RESPECT TO THE CD-ROM, CD-ROM SOFTWARE, CD-ROM DOCUMENTATION OR ANY INFORMATION
CONTAINED ON ANY OF THE FOREGOING OR ANY RESULTS OR CONCLUSIONS REACHED BY BUYER
AS A RESULT OF ACCESS TO OR USE THEREOF, OR WITH RESPECT TO ANY OTHER MATTER OR
SERVICE PROVIDED BY NORTEL, WHETHER STATUTORY, EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR AGAINST INFRINGEMENT. NORTEL SHALL NOT BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER INCLUDING
ANY SUCH DAMAGES WHICH MAY ARISE OUT OF THE USE OF OR INABILITY TO USE OR ACCESS
THE CD-ROM, THE CD-ROM SOFTWARE, THE CD-ROM DOCUMENTATION, AND FURTHER INCLUDING
LOSS OF USE, REVENUE, PROFITS OR ANTICIPATED SAVINGS REGARDLESS OF HOW SUCH
DAMAGES MAY HAVE BEEN CAUSED ARISING FROM THE USE OF OR INABILITY TO USE OR
ACCESS THE CD-ROM, CD-ROM SOFTWARE, OR CD-ROM DOCUMENTATION.
5. GENERAL
Nothing contained in this Schedule D shall limit, in any manner, Nortel's
right to change the CD-ROM Software or CD-ROM Documentation or the design
or
<PAGE>
PRODUCT ATTACHMENT
PAGE 21
characteristics of Nortel's Products at any time without notice and without
liability.
<PAGE>
Exhibit 10.38
AMENDMENT NO. 1
to
Product Attachment
Carrier Networks Products
Between
NORTHERN TELECOM INC.
AND
DELTACOM, INC.
Whereas Northern Telecom Inc. ("Nortel") and DeltaCom, Inc. entered into a
Network Products Purchase Agreement No. DM-11/95-DC on January 24, 1996, and
also entered into a Product Attachment, Carrier Network Products on January 24,
1996, (the "Product Attachment") and;
Whereas the Parties wish to amend the Product Attachment as set-forth below,
Now Therefore, the Parties hereby agree as follows:
1. Schedule A, I. Extension Ports (DMS-250 Switching System) is hereby amended
to add thereto: II Initial Systems (DMS-500 Switching Systems) which is
attached hereto.
IN WITNESS WHEREOF, the Parties have signed and executed this Amendment on the
later of the respective dates entered below.
NORTHERN TELECOM INC. DELTACOM, INC.
By: /s/ Neville Lowe By: /s/ Doug Shumate
---------------------------- ----------------------------
(Signature) (Signature)
Name: Neville Lowe Name: Doug Shumate
-------------------------- --------------------------
(Print) (Print)
Title: AVP Title: Snr VP CFO
------------------------- -------------------------
Date: 5/20/97 Date: 3-4-97
-------------------------- --------------------------
<PAGE>
Exhibit 10.39
AGREEMENT FOR USE OF OPTICAL FIBER SYSTEM,
MICROWAVE RADIO TOWER SITE AND ASSOCIATED FACILITIES
THIS AGREEMENT (hereinafter "Agreement") made and entered into as of the
2nd day of January, 1996, by and between DELTACOM, INC., an Alabama corporation,
having an office at 113 South Main Street, Arab, Alabama 35016 (hereinafter
"DeltaCom") and SCI SYSTEMS (ALABAMA), INC., an Alabama corporation, having an
office at 2109 Clinton Avenue West, Huntsville, Alabama 35805 (hereinafter
"SCI").
sdfsd
WITNESSETH:
WHEREAS, SCI has an existing optical fiber cable system (hereinafter "Cable
System") between two (2) locations in Huntsville, Alabama, and a microwave radio
tower site (hereinafter "Tower Site") located in Huntsville, Alabama; and
WHEREAS, DeltaCom desires to obtain certain rights to access and use a
portion of the Cable System and the Tower Site and SCI desires to provide
DeltaCom with said access and use;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises set forth in this Agreement, the parties hereto do hereby agree as
follows:
ARTICLE 1 TERM DEVISE AND LEASE/EASEMENT DESCRIPTIONS:
--------------------------------------------
1.1 Commencing on the date of this Agreement (hereinafter the
"Commencement Date"), SCI hereby leases the following to DeltaCom for an initial
term ending September 30, 1999, unless sooner terminated in accordance with
Section 1.3 or 8.2 or Article 9 or 16 hereof, (hereinafter referred to as the
"Initial Term") and any renewals or extensions thereof:
a) Six (6) single mode, dark optical fiber strands and relating
innerduct, conduit, building entrance facilities and associated appurtenances
located between SCI Plant #1 located at 8600 Memorial Parkway South in
Huntsville, Alabama (hereinafter "SCI Plant #1"), AND MCI's point of presence
("POP") located at 950 Monroe Street in Huntsville, Alabama, and the associated
rights to access said fiber strands (hereinafter the "Fiber System").
b) The Tower Site and relating innerduct, conduit, building entrance
facilities and associated appurtenances located at SCI Plant #1 and the
associated rights to access said tower facilities (hereinafter "Tower
Facilities"); and
1
<PAGE>
c) Sufficient, convenient, and secure floor space (hereinafter
"Floor Space") in (i) SCI Plant #1 (not to exceed the existing 407 square feet
currently in use by DeltaCom plus the additional eight (8) foot wide space
behind the existing temporary wall at said location, provided, however, that the
parties shall mutually agree on the sharing of costs to implement expansion into
the eight (8) foot area and payment of additional rent for any expansion by
DeltaCom, and (ii) SCI's Plant #13 located at 13000 South Memorial Parkway,
Huntsville, Alabama (hereinafter "SCI Plant #13") (not to exceed 10 square
feet), for the proper and efficient operation of the Fiber System and DeltaCom's
microwave radio system, including but not limited to, the installation,
maintenance, repair, and removal of DeltaCom's optical fiber and microwave radio
equipment and appurtenances thereto.
1.2 In addition to the lease described above and commencing on the
Commencement Date, SCI hereby grants and devises to DeltaCom for the duration of
the initial Term and any renewals or extensions thereof, unless sooner
terminated in accordance with the terms of this Agreement, the following
described easements:
a) An easement of ingress and egress to the leased premises
described above located at SCI Plant #1; and
b) An easement of ingress and egress to the leased premises
described above located at SCI Plant #13.
1.3 For Ten Dollars ($10.00) and other valuable consideration, provided
that this Agreement shall not have been previously terminated in accordance with
the terms set forth herein, the term of this Agreement shall automatically
renew for two (2) additional consecutive periods of five (5) years each
(hereinafter referred to as the "Renewal Terms") upon the same terms and
conditions as set forth in this Agreement, unless DeltaCom gives written notice
of termination to SCI not less than six (6) months prior to the end of the
Initial Term or any Renewal Term.
1.4 In addition, SCI agrees, upon the written request of DeltaCom, to
extend the term of this Agreement so as to remain in effect beyond the
expiration of the Renewal Terms until the expiration or termination of
DeltaCom's lease and/or easement for that certain right of way as presently
written, without further extension, or its substitution in whole or in part,
(hereinafter, the "ROW") as described in that certain agreement between the
Huntsville/Madison Railroad Authority and Southern Interexchange Facilities,
Inc., (which was merged into Delta Communications, Inc., now known as DeltaCom,
Inc., on December 31, 1993) dated January 26, 1990.
1.5 SCI agrees to remain a customer of DeltaCom by entering into a three
(3) year term agreement (hereinafter "Term Agreement") with DeltaCom,
simultaneous with the closing of that certain transaction for the purchase of
DeltaCom, Inc., stock
2
<PAGE>
among Sidney L. McDonald, Brindlee Mountain Telephone Company, SCI Systems
(Alabama), Inc., and ITC Holding Company, Inc., (hereinafter the "Closing"), for
the provision of DeltaCom's switched service. During the three (3) year term of
the Term Agreement, SCI's level of telecommunications traffic across DeltaCom's
network shall at all times be equal to or greater than SCI's average number of
monthly minutes for the twelve (12) months immediately preceding the Closing,
and the rates charged to SCI for said services shall be the lowest rate charged
by DeltaCom to a retail customer which has committed to use DeltaCom's services
for thirty-six (36) months with substantially equivalent volume of minutes
usage for each month during the term of the Term Agreement. Within a reasonable
period of time prior to the expiration of the Term Agreement, SCI and DeltaCom
agree to negotiate in good faith for the continuation of the provision of
telecommunications services from DeltaCom to SCI.
ARTICLE 2 CONSIDERATION TO SCI
--------------------
2.1 In further consideration of the leases and easements described in
Article 1 above, during the Initial Term, and any Renewal Term, DeltaCom shall:
a) Pay SCI the sum of $5,000.00 per annum, with payment for the
initial year of this Agreement being payable upon the signing of this Agreement
by the parties and payable thereafter annually on the first day of October of
each subsequent year;
b) Assume the total cost associated with the maintenance,
continuation, and preservation of the ROW, including but not limited to payment
of an annual fee equal to the sum of Four Thousand, Eight Hundred and No/100
dollars ($4,800.00), plus any applicable consumer price index escalators;
ARTICLE 3 TAXES:
------
3.1 SCI shall be responsible for and shall timely pay any and all taxes
and franchise, license and permit fees based on the physical location of the
Fiber System, Tower Site and Floor Space.
3.2 DeltaCom shall be responsible for paying any applicable federal,
state or local use, excise, franchise or sales taxes and license or permit fees
(hereinafter collectively referred to as "Taxes and Fees") assessed against it
for its use of the Fiber System, Tower Facilities, and Floor Space, other than
personal or business property taxes or taxes based on physical location, during
the Initial Term of this Agreement, or any Renewal Term. If any such Taxes and
Fees (other than personal or business property taxes based on physical location)
are assessed against
3
<PAGE>
DeltaCom, DeltaCom shall pay such Taxes and Fees. In the event DeltaCom wishes
to contest any Taxes and Fees imposed on or assessed against DeltaCom, DeltaCom
shall have the right to protest, by appropriate proceedings, the imposition or
assessment of any such Taxes and Fees. In such event, DeltaCom shall indemnify
and hold SCI harmless from any expense, legal action or cost, including
reasonable attorney's fees, resulting from the exercise of its rights under this
Paragraph 3.2.
3.3 SCI and DeltaCom shall cooperate in taking all reasonable actions
necessary to minimize, or to qualify for exemptions from, any federal, state or
local use, excise or sales taxes or similar duties or liabilities, including by
the furnishing of certifications that purchases by DeltaCom are for purposes of
resale.
ARTICLE 4 CERTAIN OBLIGATIONS OF DELTACOM
-------------------------------
4.1 Except as provided in Section 4.2 or 4.3 or in Article 8, DeltaCom,
at its sole expense, shall use its reasonable efforts to perform all routine
maintenance and repair functions and emergency maintenance and repair functions
to the Fiber System and DeltaCom's microwave radio system, as well as
maintaining the microwave radio licenses WLC905 (Lacey, AL), WLN700
(Clinton, AL), (collectively, the "Licenses") for the microwave radio system, at
DeltaCom's sole cost and expense. Notwithstanding the foregoing, in the event
DeltaCom's 6 megahertz microwave radio system (hereinafter, the "DeltaCom
microwave radio system") is (a) no longer in service due to significant damage
to the DeltaCom microwave radio system or, (b) DeltaCom determines it to be in
the best interest of DeltaCom, in DeltaCom's sole discretion and business
judgment, to retire deltaCom's microwave radio system, or any portion thereof,
then upon DeltaCom's cessation of operation of the DeltaCom microwave radio
system for either (a) or (b) herein, and after delivery of prior written notice
to SCI as is reasonable under the circumstances, DeltaCom shall no longer be
required to continue the maintenance and repair functions described in this
Agreement relating to the DeltaCom microwave radio system; provided, however,
DeltaCom shall in any event continue to maintain the Licenses so long as a
microwave radio system at the sites covered by the Licenses remains in
operation. SCI shall have the right to have an employee or representative
available to assist DeltaCom in any maintenance or repair of the Fiber System.
4.2 In the event all or any part of the Fibre System, Tower Facilities
and Floor Space shall require replacement or mutually agreeable substitution
during the Initial Term of this Agreement, or any Renewal Term, such replacement
or substitution shall be made as SCI's sole cost and expense.
4.3 DeltaCom shall use its reasonable efforts to perform all routine
maintenance and repair functions and emergency maintenance and repair functions
to SCI's fiber system from the MCI Huntsville POP to SCI's Administration
building, 2101
4
<PAGE>
West Clinton Avenue, Huntsville, at DeltaCom's sole cost and expense. SCI shall
have the right to have an employee or representative available to assist
DeltaCom in any maintenance or repair of this fiber system.
4.4 DeltaCom shall provide routine and emergency maintenance for SCI fiber
optic lines between SCI Plant #4 located at 1000 Fields Road, Lacey Springs,
Alabama, and SCI's Administration Building located at 2101 Clinton Avenue West,
Huntsville, Alabama, at no cost to SCI; and
4.5 DeltaCom shall provide the following telecommunication circuits at no
cost to SCI:
a) Two (2) DS3 circuits from SCI Plant #1 to DeltaCom's Arab POP
located at 113 South Main Street, Arab, Alabama;
b) One (1) T1 circuit from SCI Plant #1 to DeltaCom's POP located in
Birmingham, Alabama; and
c) Two (2) voice grade circuits from SCI Plant #1 to LDDS/Worldcom's
(formerly IDB Worldcom) POP located at 165 Boulevard Street, S.E, in Atlanta,
Georgia.
4.6 DeltaCom shall use its reasonable efforts to maintain and hold, at
DeltaCom's expense, the existing microwave radio Licenses for the following
microwave radio links:
a) SCI's Administration Building located at 2101 Clinton Avenue
West, Huntsville, Alabama, to SCI Plant #1; and
b) SCI's Plant #1 to SCI's Plant #4 located at 1000 Fields Road,
Lacey Springs, Alabama.
4.7 The Fiber System, the Tower Facilities and Floor Space under this
Agreement may be used by DeltaCom, among other things,in furnishing services
offered to its customers and for operational purposes directly related to the
provision of DeltaCom's authorized services.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES:
------------------------------
5.1 Each party hereby represents and warrants to the other party hereto as
follows:
5
<PAGE>
a) The execution, delivery and performance by such party of this
Agreement and all other agreements and documents contemplated hereby, the
fulfillment of and the compliance with the respective terms and provisions
hereof and thereof and the consummation by such party of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action of such party (which authorization has not been
modified or rescinded and is in full force and effect), and will not: (i)
conflict with, or violate any provision of, any term or provision of the
organizational documents of such party or (ii) conflict with, or result in any
breach of, or constitute a default under, any agreement to which such party is a
party or by which such party is bound. No other corporate or partnership action
of such party is necessary for such party to enter into this Agreement and all
other agreements and documents contemplated hereby and to consummate the
transactions contemplated hereby and thereby.
b) This Agreement constitutes a valid and binding obligation of such
party, enforceable in accordance with its terms. Each agreement or document to
be executed by such party pursuant hereof, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of such party, enforceable in accordance with its terms.
c) Such party knows of no action or proceeding by or before any
governmental authority pending or threatened that might restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
5.2 SCI hereby represents and warrants to DeltaCom that:
a) SCI has obtained, and will use its reasonable efforts to maintain
throughout the Initial Term of this Agreement, and any Renewal Term, each and
every governmental or municipal approval, franchise and authorization, each and
every right-of-way agreement and pole attachment agreement, and each and every
lease, license, consent or other agreement including agreements of underlying
landowners (all of the foregoing hereinafter collectively referred to as the
"Authorizations"), necessary for SCI to construct, install, maintain and repair
the Fiber System and Tower Facilities and for SCI to perform its obligations
under this Agreement.
b) SCI has no knowledge of any defect in the normal operating
condition of the Fiber System or the physical condition of the Tower Site, Tower
Facilities and Floor Space which defect would have an adverse effect on the
ability of DeltaCom to utilize the Fiber System, Tower Site, Tower Facilities,
and Floor Space to provide telecommunications services.
6
<PAGE>
5.3 DeltaCom hereby represents and warrants to SCI that:
a) DeltaCom has obtained and will use its reasonable efforts to
maintain throughout the Initial Term of the Agreement, and any Renewal Term,
each and every authorization necessary for DeltaCom to offer the services to SCI
provided for herein.
b) The Fiber System, Tower Facilities, Tower Site, and Floor Space
provided under this Agreement shall not be used by DeltaCom for any unlawful
purpose.
ARTICLE 6 WARRANTY: LIMITATION OF LIABILITY:
----------------------------------
6.1 The quality of the Fiber System, Tower Facilities and Floor space
provided hereunder shall be consistent with telecommunications industry
standards, applicable government regulations, and sound business practices.
6.2 EXCEPT AS EXPRESSLY STATED IN THIS ARTICLE 6 AND ARTICLE 11, IN NO
EVENT SHALL EITHER PARTY HERETO BE LIABLE TO THE OTHER PARTY OR THE OTHER
PARTY'S CUSTOMERS OR CLIENTS OR ANY OTHER PERSON, FIRM OR ENTITY IN ANY RESPECT,
INCLUDING, WITHOUT LIMITATION, FOR ANY DAMAGES, EITHER DIRECT, INDIRECT,
CONSEQUENTIAL, SPECIAL, INCIDENTAL, ACTUAL, PUNITIVE, OR ANY OTHER DAMAGES, OR
FOR ANY LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER, ARISING OUT OF MISTAKES,
ACCIDENTS, ERRORS, OMISSIONS, INTERRUPTIONS, OR DELAYS, INCLUDING THOSE WHICH
MAY BE CAUSED BY REGULATORY OR JUDICIAL AUTHORITIES, RELATING TO THIS AGREEMENT
OR THE OBLIGATIONS OF SUCH PARTY PURSUANT TO THIS AGREEMENT.
ARTICLE 7 COMPLIANCE WITH LAW:
--------------------
Each party hereto agrees that it will perform its respective rights and
obligations hereunder in accordance with all applicable laws, rules and
regulations, including, but not limited to, the Communications Act of 1934, as
amended, and the policies, rules and regulations of the FCC.
ARTICLE 8 REPLACEMENT AND RELOCATION OF THE FIBER SYSTEM AND ASSOCIATED
-------------------------------------------------------------
FACILITIES:
-----------
8.1 In the event the Fiber System, Tower Facilities and/or Floor Space are
destroyed or substantially damaged, SCI shall use reasonable efforts to
reconstruct
7
<PAGE>
or repair the same to good condition and provide DeltaCom with possession of
similar floor space to that which DeltaCom enjoys hereunder.
8.2 In the event SCI is required to relocate the Fiber System, Tower
Facilities and/or Floor Space, or any portion thereof, SCI shall be solely
responsible for all costs incurred in connection with such relocation and shall
use all reasonable efforts to do so in a manner that will not cause any
interruption in DeltaCom's use thereof. SCI agrees to notify DeltaCom as soon as
possible of any relocation or of any governmental proceedings which might result
in a relocation, or such lesser amount of notice as SCI receives from such
governmental authority, and DeltaCom shall have the right to participate in any
such proceedings at DeltaCom's own cost and expense. If SCI cannot relocate the
Fiber System, Tower Facilities and/or Floor Space, or affected portion thereof,
DeltaCom may terminate this Agreement upon giving at least three (3) months
written notice to SCI. Upon the effective date of termination undertaken in
accordance with the provisions of the preceding sentence, this Agreement shall
become null and void and neither party hereto shall have any further obligation,
except as may have accrued through the effective date of termination, to the
other with respect thereto.
ARTICLE 9 CONDEMNATION:
-------------
If at any time during the Initial Term of this Agreement, or any Renewal
Term, all or any significant portion of the Fiber System, Tower Site, Tower
Facilities and/or Floor Space shall be taken for any public or quasipublic
purpose by any lawful power or authority by the exercise of the right of
condemnation or eminent domain, either party may elect to terminate this
Agreement upon giving the other Party three (3) months prior written notice.
ARTICLE 10 ADMINISTRATION OF THIS AGREEMENT:
---------------------------------
10.1 Within thirty (30) calendar days after the Commencement Date of this
Agreement, SCI and DeltaCom shall each designate, by written notice to the
other, a representative who is authorized to act in the respective party's
behalf with respect to all matters pertaining to this Agreement; except as set
forth in this Article 10. Each party may designate an alternate representative
with full authority to act in the absence of the authorized representative.
Each party shall have the right to change its authorized representative or
alternate representatives by written notice.
10.2 The authorized representatives (and alternate representatives) shall
provide liaison between the parties in order to provide effective cooperation,
exchange or information and consultation in a prompt and orderly basis
concerning matters which may arise, from time to time, in connection with this
Agreement.
8
<PAGE>
10.3 The authorized representatives shall have the following
responsibilities, among others:
a) Perform those functions and duties assigned to them in this
Agreement;
b) Review and attempt to resolve any disputes between the parties
arising under this Agreement. Should the authorized representatives be unable
to resolve a dispute, the matter shall be resolved in accordance with the
provisions of Article 29 herein; and
c) Arrange for the development and completion of procedures to
implement the provisions of this Agreement.
10.4 All actions, agreements, resolutions, determinations or reports made
by the authorized representatives, shall be in writing and shall become
effective when signed by both authorized representatives.
10.5 Any expenses incurred by the authorized representative in connection
with his/her duties shall be paid by the party he/she represents.
10.6 The authorized representatives shall have no authority to modify this
Agreement.
ARTICLE 11 INDEMNIFICATION:
----------------
11.1 Notwithstanding the limitation of liability of the parties hereto as
described in Section 6.2 hereof, each party hereto agrees to indemnify, defend,
protect and save the other party hereto harmless from and against any claim,
damage, loss, liability, cost and expense (including reasonable attorney's fees)
in connection with any loss or damage to any property or facilities of any party
(including DeltaCom, SCI or any other party operating or using any part of the
Fiber System, Tower Facilities and Floor Space) arising out of or resulting in
any way from the acts or omissions to act, negligent or otherwise, of such party
hereto, its employees, servants, contractors and/or agents in connection with
the exercise of its rights and obligations under the terms of this Agreement.
The parties hereto expressly recognize and agree that each parties' said
obligation to indemnify, defend, protect and save the other harmless is not a
material obligation to the continuing performance of the parties' other
obligations, if any, under the terms of this Agreement. In the event a party
shall fail for any reason to so indemnify, defend, protect and save the other
harmless, the indemnified party hereby expressly recognizes that its sole remedy
in such event shall be the right to bring suit against the indemnifying party
for its damages as a result of the indemnifying party's failure to so indemnify,
defend, protect and save harmless.
9
<PAGE>
11.2 Notwithstanding the limitation of liability of the parties hereto as
described in Section 6.2 hereof, each party hereto shall indemnify and hold the
other and/or all of its officers, agents, servants, parent, subsidiaries and
employees ("Affiliates") or any of them, harmless from and against any and all
losses, claims, damages, liabilities, costs, and expenses ("Claims") imposed
upon either party by reason of personal injuries, including death, to
Affiliates, employees or subcontractors, and all other persons performing this
Agreement as a result of a negligent act or omission on the part of the
indemnifying party, its Affiliates or subcontractors in connection with the
performance of this Agreement.
11.3 Nothing contained herein shall operate as a limitation on the right of
either party hereto to bring an action for damages, including consequential
damages, against any unrelated third party based on any acts or omissions of
such unrelated third party as such acts or omissions may affect the
construction, operation or use of the Fiber System, Tower Site, Tower
Facilities, and Floor Space; provided, however, that each party hereto shall
assign such rights or claims, execute such documents and do whatever else may
be reasonably necessary to enable the injured party to pursue any such action
against such unrelated third party.
ARTICLE 12 INSURANCE:
----------
12.1 During the Initial Term of this Agreement, and any Renewal Term,
DeltaCom shall, at its own expense, maintain in effect, and shall cause its
contractors who perform services under this Agreement to maintain in effect,
insurance coverage with limits not less than those set forth herein:
a) Worker's compensation insurance with statutory limits as required
by the laws and regulations applicable to the performance of this Agreement and
DeltaCom or such contractors, as the case may be;
b) Employer's liability insurance for employees as required by
applicable law;
c) Commercial general liability insurance, covering claims for
bodily injury, death and property damage, including comprehensive form, premises
and operations, independent contractors, products and completed operations,
personal injury, contractual, and broad form property damage liability coverage,
with minimum limits of $1,000,000 per occurrence and minimum aggregate limits of
$5,000,000; and
d) Comprehensive automobile liability insurance for any automobile
used in connection with the performance of this Agreement with combined single
limits of $1,000,000.
10
<PAGE>
All such policies of insurance shall provide that the same shall not be
cancelled nor the coverage reduced nor the limits reduced without first giving
thirty (30) days prior written notice thereof to SCI. No such cancellation,
modification or change shall affect DeltaCom's obligation to maintain the
insurance coverage required by this Agreement. All liability insurance policies
shall be written on an "occurrence" basis. DeltaCom shall be responsible for
payment of any and all deductibles from insured claims under its policies. Upon
reasonable request, DeltaCom shall furnish to SCI a certificate of insurance as
evidence of compliance with the aforementioned requirements.
12.2 The foregoing insurance requirements are not intended to and shall not
in any manner limit or qualify the liabilities and obligations assumed by
DeltaCom under this Agreement.
ARTICLE 13 UTILITIES AND SECURITY:
----------------------
13.1 If necessary, and where applicable, SCI shall provide, at no cost to
DeltaCom, all electricity, sanitary facilities and other utilities at SCI's
locations as DeltaCom may reasonably require to provide safe and convenient
working conditions for DeltaCom's personnel and contractors for the
installation, maintenance and repair of the Fiber System, Tower Facilities and
DeltaCom's microwave system.
13.2 DeltaCom shall be responsible for maintaining and repairing all
equipment it installs in the SCI locations. To facilitate DeltaCom's
maintenance and repair activities, DeltaCom shall have unrestricted access to
its equipment in the SCI locations twenty-four (24) hours a day, seven (7) days
a week, subject to reasonable security rules and regulations at SCI locations.
SCI shall have no responsibility for any damage or loss to DeltaCom's fiber
optic and microwave equipment or system or any portion or component thereof
which is on or in a SCI location, including, without limitation, if such damage
or loss results from a fire, other casualty, theft, mysterious disappearance,
vandalism or condemnation.
13.3 Any and all equipment installed and subsequently operated or
maintained by DeltaCom, or at the direction of DeltaCom, in the SCI locations or
on the Tower Site shall be and remain at all times the personal property of
DeltaCom, and shall at no time be deemed to be the property of SCI, regardless
of the manner or method of attachment to real estate or of installation.
ARTICLE 14 USE OF DELTACOM'S FIBER OPTIC AND MICROWAVE
-------------------------------------------
RADIO NETWORKS:
---------------
DeltaCom shall have exclusive control over its provisioning of
telecommunications services over DeltaCom's fiber optic and microwave radio
11
<PAGE>
networks including, without limitation, customer premise electronics, sales and
marketing, electronics maintenance and monitoring, and billing and collection.
ARTICLE 15 NOTIFICATION OF CERTAIN GOVERNMENTAL
------------------------------------
ACTIONS:
-------
Each party shall promptly notify the other party of any action or
proceeding by or before any governmental authority pending or threatened that
might restrain, prohibit or invalidate the transactions contemplated by this
Agreement within five (5) business days after such party learns of such an
action or proceeding. Each party shall cooperate with the other party in
connection with any such action or proceeding and shall permit the other party
to participate, at such other party's sole expense, in any such pending or
threatened action or proceeding.
ARTICLE 16 DEFAULT:
-------
16.1 DeltaCom shall not be in default under this Agreement, or in breach of
any provision hereof unless and until SCI shall have given DeltaCom written
notice of such breach and DeltaCom shall have failed to cure the same within
thirty (30) days after receipt of such notice, other than any default in payment
which must be cured within fifteen (15) business days after receipt of such
notice; provided, however, that where such breach cannot reasonably be cured
within such thirty (30) day period if DeltaCom shall proceed promptly to cure
the same and prosecute such curing with due diligence, the time for curing such
breach shall be extended for such period of time as may be necessary to complete
such curing. Upon the failure by DeltaCom to timely cure any such breach after
notice thereof from SCI, SCI shall have the right to (i) take such action as it
may determine, in its sole discretion, to be necessary to cure the breach or
(ii) terminate this Agreement.
16.2 SCI shall not be in default under this Agreement or in breach of any
provision hereof unless and until DeltaCom shall have given SCI written notice
of such breach and SCI shall have failed to cure the same within thirty (30)
days after receipt of such notice: provided, however, that where such breach
cannot reasonably be cure within such thirty (30) day period, if SCI shall
proceed promptly to cure the same and prosecute such curing with due diligence,
the time for curing such breach shall be extended for such period of time as may
be necessary to complete such curing. Upon the failure by SCI to timely cure any
such breach after notice thereof from DeltaCom, DeltaCom shall have the right to
(i) take such action as it may determine, in its sole discretion, to be
necessary to cure the breach or (ii) terminate this Agreement.
16.3 If SCI or DeltaCom, as the case may be, shall file a petition in
bankruptcy or for reorganization or for an arrangement pursuant to any
present or
12
<PAGE>
future federal or state bankruptcy law or under any similar federal or state
law, or shall be adjudicated a bankrupt or insolvent, or shall make a general
assignment for the benefit of its creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or any involuntary
petition proposing the adjudication of SCI or DeltaCom, as the case may be, as a
bankrupt or its reorganization under any present or future federal or state
bankruptcy law or any similar federal or state law shall be filed in any court
and such petition shall not be discharged or denied within ninety (90) days
after the filing thereof, or if a receiver, trustee or liquidator of SCI or
DeltaCom, as the case may be, shall be appointed in any proceeding brought by
SCI or DeltaCom, as the case may be, and shall consent to or acquiesce in such
appointment, then the other party hereto may, at its sole option, immediately
terminate this Agreement.
ARTICLE 17 FORCE MAJEURE:
--------------
Neither party shall be liable to the other for any failure of performance
under this Agreement due to causes beyond its reasonable control (except for the
fulfillment of accrued/incurred payment obligations as set forth herein),
including, but not limited to: acts of God, fire flood or other catastrophes;
adverse weather conditions; material or facility shortages or unavailability not
resulting from such party's failure to timely place orders therefor; lack of
transportation; the imposition of any governmental codes, ordinances, laws,
rules, regulations or restrictions; national emergencies; insurrections; riots,
wars; strikes, lock-outs, work stoppages or other labor difficulties; and any
laws, order, regulation, or action, directly affecting a performance obligation
hereunder, of the United States government, or of any state or local government,
or of any department, agency, commission, court, bureau, corporation or other
instrumentality of any one or more such governments; provided, however, that
revocation or loss of any license required by a party for performance hereunder
arising from an act or omission of that party shall not excuse failure by that
party to perform any obligation required by this Agreement (collectively, "force
majeure events"). The party whose performance is so affected shall use all
reasonable efforts under the circumstances to avoid or remove such causes or
nonperformance and shall proceed to perform with reasonable dispatch whenever
such causes are removed or cease.
ARTICLE 18 ASSIGNMENT:
-----------
18.1 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors or assigns; provided, however,
that no assignment hereof or sublease, assignment or licensing (hereinafter
collectively referred to as a "Transfer") of any rights or obligations hereunder
shall be valid for any purpose without the prior written consent of each party
hereto; provided, further, however, that without such consent, DeltaCom shall
have the right to assign this Agreement to any parent, subsidiary or affiliate
of DeltaCom or to any person, firm or
13
<PAGE>
corporation which shall control, be under the control of, or be under common
control with DeltaCom or to any person, firm or corporation into or with which
DeltaCom may be merged or consolidated or which purchases all or substantially
all of the assets or stock of DeltaCom; provided, further, however, that without
such consent SCI shall have the right to assign this Agreement to any entity of
which at least 50% of the voting stock is owned by SCI.
18.2 In the event of any assignment or Transfer by either party undertaken
pursuant to Section 18.1, herein, the assigning or transferring party shall
remain liable for all its obligations under this Agreement, unless: (a) the
other party consents to release, by written instrument, the assigning or
transferring party from such obligations, and (b) the assignee or transferee
shall have affirmatively assumed in writing all of the obligations of the
assigning or transferring party under this Agreement.
ARTICLE 19 WAIVER OF TERMS OR CONSENT TO BREACH:
-------------------------------------
19.1 Neither the waiver by either of the parties hereto of a breach or a
default under any of the provisions of this Agreement, nor the failure of either
of the parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder shall thereafter
be construed as a waiver of any subsequent breach or default of a similar
nature, or as a waiver of any such provisions, rights or privileges hereunder.
19.2 No term or provision of this Agreement shall be waived and no breach
excused, unless such waiver or consent shall be in writing and signed by a duly
authorized officer of the party claimed to have waived or consented to such
breach. Any consent by either party to, or waiver of, a breach by the other
party shall not constitute a waiver or consent to any subsequent of different
breach. If either party shall fail to enforce a breach of this Agreement by the
other party, such failure to enforce shall not be considered a consent to or a
waiver of said breach or any subsequent breach for any purpose whatsoever.
ARTICLE 20 RELATIONSHIP NOT A PARTNERSHIP OR AN AGENCY:
-------------------------------------------
Nothing in this Agreement shall be deemed to create any relationship
between SCI and DeltaCom other than that of independent parties contracting
with each other solely for the purpose of carrying out the provisions of this
Agreement. Neither of the parties hereto shall be deemed or construed, by virtue
of this Agreement, to be the agent, employee, representative, partner, or joint
venturer of the other. Neither party is authorized, by virtue of this Agreement,
to represent the other party for any purpose whatsoever without the prior
written consent of the other party. Neither party shall be liable for any
workers compensation, social security, withholding, tax or other taxes or
14
<PAGE>
payments of like nature or for any injury or damage with respect to the
employees of the other party by reason of this Agreement. Notwithstanding any
other provision of this Agreement, the provision of facilities and services as
set forth in this Agreement does not constitute a joint undertaking with
DeltaCom for the furnishing of telecommunications service to customers of
DeltaCom.
ARTICLE 21 NO THIRD-PARTY BENEFICIARIES:
-----------------------------
This Agreement is for the sole benefit of the parties hereto and their
respective permitted successors and assigns, and shall not be construed as
granting rights to any person or entity other than the parties hereto or
imposing on either party obligations to any person or entity other than a party.
ARTICLE 22 EFFECT OF ARTICLE AND SECTION HEADINGS:
---------------------------------------
Article and Section headings appearing in this Agreement are inserted for
convenience only and shall not be construed as interpretations of text.
ARTICLE 23 NOTICES
-------
23.1 Any written notice under this Agreement shall be deemed properly given
if sent by registered or certified mail, postage prepaid, or by nationally
recognized overnight delivery service or by facsimile to the address specified
below, unless otherwise provided for in this Agreement:
If to DeltaCom: (One copy to each)
DELTACOM, INC.
Attention: President
and
DELTACOM, INC.
Attention: General Counsel
113 South Main Street
Arab, AL 35016
Facsimile Number: (205)586-1365
If to SCI (One copy to each)
SCI SYSTEMS (ALABAMA), INC.
Attention: President
and
15
<PAGE>
SCI SYSTEMS (ALABAMA), INC.
Attention: General Counsel
2109 Clinton Avenue W.
Huntsville, AL 35805
Facsimile Number. (205)882-4603
23.2 Either party may, by written notice to the other party,
change the name and/or address of the person to receive notices
pursuant to this Agreement.
23.3 Unless otherwise provided herein, notices shall be deemed
delivered: if sent by U.S. Mail, five (5) days after deposit; if sent
by facsimile, upon verification of receipt; or, if sent by commercial
overnight delivery service, one (1) day after deposit.
ARTICLE 24 SEVERABILITY:
-------------
In the event any term, covenant or condition of this Agreement, or
the application of such term, covenant or condition, shall be held invalid
or unenforceable as to any person or circumstance by any court having
jurisdiction, all other terms, covenant and conditions of this Agreement and
their application shall not be affected thereby, but shall remain in force
and effect unless a court holds that the invalid term, covenant or condition
is not separable from all other terms, covenants and conditions of this
Agreement.
ARTICLE 25 GOVERNING LAW:
--------------
This Agreement, the rights and obligations of the parties hereto, and any
claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of Alabama (but not including the choice of law rules
thereof).
ARTICLE 26 PLURALS:
--------
In construction of this Agreement, words used in the singular shall
include the plural and the singular.
ARTICLE 27 ENTIRE AGREEMENT: AMENDMENT:
----------------------------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and it supersedes all
prior oral or written agreements, commitments or understandings with
respect to the matters provided for herein. The terms of this Agreement
may only be amended or modified by an instrument in writing executed by the
parties hereto.
<PAGE>
ARTICLE 28 COUNTERPARTS:
-------------
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and any of the
parties hereto may execute this Agreement by signing any such counterparts.
ARTICLE 29 DISPUTE RESOLUTION:
-------------------
29.1 It is the intent of SCI and DeltaCom that any disputes which may arise
between them, or between the employees of each of them, be resolved as quickly
as possible. Quick resolution may, in certain circumstances, involve immediate
decisions made by the parties' representatives. When such resolution is not
possible, and depending upon the nature of the dispute, the parties hereto agree
to resolve such disputes in accordance with the provisions of this Article 29.
29.2 Any disputed issues arising under the terms of this Agreement shall in
all instances be initially referred to the parties' designated representatives.
The parties' designated representatives shall render a mutually agreeable
resolution of the disputed issue, in writing, within three (3) business days of
such referral.
29.3 Any claims or disputes which the parties' are unable to resolve within
the period specified in Section 29.2 herein, shall be presented by the claimant
in writing to the other party within thirty (30) days after the circumstances
which gave rise to the claim or dispute took place or became known to the
claimant, whichever is later. The written notice shall contain a precise
statement of the claim or issue in dispute, together with relevent facts and
data to support the claim. In the event of any such claim or dispute, the
parties hereto shall negotiate in good faith to resolve the claim or dispute.
29.4 In the event any claim or dispute cannot in good faith be resolved
among the parties and suit is brought or an attorney is retained by either party
to enforce the terms of this Agreement or to collect money damages for breach
hereof, the prevailing party shall be entitled to recover, in addition to any
other remedy, reimbursement for reasonable attorney's fees and court costs
incurred in connection therewith.
ARTICLE 30 OTHER VENTURES:
---------------
Both parties 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 the operation of fiber optic
transmission facilities, except as specifically and explicitly limited pursuant
to this Agreement. Nothing in this Agreement is intended, or shall be
interpreted, to restrict either party in connection with any such activity which
competitive
17
<PAGE>
with the activities contemplated pursuant to this Agreement, so long as a party
does not violate any specific, explicit restriction or obligation set forth in
this Agreement.
ARTICLE 31 FURTHER ASSURANCES:
-------------------
Each of the parties hereto agrees to execute and deliver or cause to be
executed and delivered such further instruments, to take or cause to be taken
such further actions, and to use its reasonable efforts to obtain such requisite
consents as the party may from time to time reasonably request in order to
effectuate fully the purposes, terms and conditions of this Agreement.
ARTICLE 32 SURVIVAL OF TERMS:
------------------
The terms and provisions contained in this Agreement that by their sense
and context are intended to survive the performance thereof by the parties
hereto shall so survive the completion of performance and termination of this
Agreement, including, without limitation, provisions for indemnification and the
making of any and all payments due hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives as of the day and
year first above written.
DELTACOM:
---------
ATTEST: DELTACOM, INC.
By:/s/ Tom Mullis By: /s/ Foster O. McDonald
------------------------ -----------------------------------
Tom Mullis Foster O. McDonald
Its Secretary Its President
SCI:
----
ATTEST: SCI SYSTEMS (ALABAMA), INC.
By:/s/ Michael M. Sullivan By:/s/ Olin B. King
------------------------ ------------------------------------
Michael M. Sullivan Olin B. King
Its Secretary Its Chairman/Chief Executive Officer
18
<PAGE>
Exhibit 10.40
Contract K-177
COLLOCATE AGREEMENT
THIS AGREEMENT is entered into this 7th day of January , 1991
---- ----------- --
between Williams Telecommunications Services, Inc. ("WTG"), a wholly owned
subsidiary of Williams Telecommunications Group, Inc. with and on behalf
of WTG Affiliates (hereinafter defined), and Southern Interexchange
----------------------
Facilities, Inc., a Alabama corporation, with its principal office at
- ---------------- -------
113 South Main Street, Arab, Alabama 35016 ("Customer").
- ---------------------------------------------
RECITALS:
WHEREAS, WTG has the requisite authority to act on behalf of WTG
Affiliates, and the parties designated herein as WTG Affiliates are entities,
business organizations or enterprises in which the majority of stock or
controlling interest is owned or controlled by the same entity owning or
controlling the majority of stock or controlling shares of WTG (the "WTG
Affiliates"); and,
WHEREAS, for purposes of this Agreement, the term "WTG" shall also be
deemed to refer to the appropriate WTG Affiliate which is the lessee or owner of
the Space (as hereinafter defined) in question as identified on the Collocate
Schedule(s) (as hereinafter defined); and,
WHEREAS, WTG Affiliates currently own or lease certain premises (the
"Premises") described in the Collocate Schedule(s) and amendments thereto, if
any, identified herewith and made a part hereof, at which certain services
will be provided in conformity with the applicable specifications set forth in
Exhibits to each Collocate Schedule. Each Collocate Schedule shall only be
effective upon its being dated and subscribed to by the parties for
identification purposes and together with the terms hereof shall constitute the
exclusive agreement between the parties with respect to the Space (collectively
the "Agreement"); and,
WHEREAS, Customer desires access to the Premises and to locate therein
certain telecommunications equipment and cabling (hereinafter the "Equipment")
for the purpose of interconnecting the Equipment with the WTG Affiliates'
telecommunications network (the "WTG Network"); and,
WHEREAS, WTG on behalf of WTG Affiliates, is willing to grant Customer a
license to occupy a portion of the Premises upon the terms and conditions
hereinafter set forth.
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NOW, THEREFORE, in consideration of the mutual covenants contained herein,
WTG and Customer hereby agree as follows:
1. LICENSE TO OCCUPY AND RELOCATION PROVISIONS. WTG hereby grants to
Customer a license to occupy the portion of the Premises depicted in each
Collocate Schedule (the "Space"). The Space is accepted "AS-IS" by Customer. It
is expressly understood that Customer may use the Space only for the purposes of
installing, maintaining and operating the Equipment to interconnect with digital
telecommunications services provided to Customer or Customer's customer(s) by
WTG. Only upon the express written consent of WTG may Customer interconnect the
Equipment with telecommunications service provided to Customer by others. If
Customer should interconnect with any entity other than WTG without obtaining
the written consent of WTG, Customer will be in breach of this Agreement, and
WTG may pursue any legal or equitable remedy, including but not limited to the
immediate termination of the license pursuant to Paragraph 11 of this Agreement.
Upon sixty (60) days' prior written notice or, in the event of an
emergency, such time as may be reasonable, WTG may require Customer to relocate
the Equipment; provided, however, the site of relocation shall afford comparable
environmental conditions for the Equipment and comparable accessibility to the
Equipment. All costs of relocating the Equipment shall be borne by Customer;
provided, however, Customer shall not be required to pay for the cost of
improving the Space to which the Equipment may be relocated.
2. SERVICES; STANDARD SPECS; SPECIAL TERMS. WTG shall provide Customer
with the services (the "Services") described in Exhibits attached to each
Collocate Schedule and incorporated therein by reference. The Services will be
performed at the Space during the Term (as hereinafter defined) of the license
relevant to the Space and any month-to-month extension thereof, if applicable.
WTG does not warrant that the Services will be free from any interruptions for
any reason whatsoever and WTG shall not be liable for any failure to provide the
Services where such failure is due to an act of God, governmental control or
other factors beyond the reasonable control of WTG.
Customer shall abide by the Standard Specifications as set forth in
Exhibits incorporated by reference in each Collocate Schedule. Customer agrees
to maintain all of its Equipment placed in the Space at Customer's expense.
Special terms and conditions, if any, relevant to a particular Space may be
negotiated between the parties and set forth in the Collocate
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Schedule(s). Such special terms and conditions shall control in the event of a
conflict between such terms and the terms stated herein.
3. TERM, OPTIONS TO RENEW AND POSSESSION. The date on which the
Customer's license to occupy the Space commences and the terms of the
Customer's license to occupy the Space are set forth in the Collocate
Schedule(s) (the "Initial Term").
Subject to the conditions specified below in this Paragraph 3, Customer
shall have the option, upon thirty (30) days' prior written notice to WTG, to
renew its license to occupy the Space for the period(s) of time (the "Renewal
Periods") and on the terms and conditions which are set forth in this Agreement
and the Collocate Schedule relevant thereto. The Initial Term and any Renewal
Periods are sometimes collectively referred to as the "Term".
Customer's option to renew its license to occupy the Space shall be
contingent on the election by WTG Affiliates to continue to own or lease the
Premises in which the Space is located for the duration of the Renewal
Period(s), such election to be exercised at the sole discretion of the
appropriate WTG Affiliate.
Following the expiration of the Initial Term or Renewal Period, if any,
stated in the Collocate Schedule(s) or failure of the parties to enter into any
Renewal Periods, Customer's license shall continue in effect on a month-to-month
basis upon the same terms and conditions specified herein, unless terminated by
either Customer or WTG upon thirty (30) days' prior written notice.
If WTG fails for any reason to tender possession of the Space to Customer
on or before the Commencement Date (specified in the Collocate Schedule relevant
thereto) this Agreement shall not be void or voidable and WTG shall not be
liable to Customer in any way as a result of such failure to tender possession.
In the event that WTG is delayed in tendering possession of the Space to
Customer for any reason other than the acts or omissions of Customer, Customer
shall not be obligated to pay the Occupancy Fee (as hereinafter defined)
hereunder until such time as WTG tenders possession of the Space to the
Customer.
4. OCCUPANCY FEE AND TAXES. Customer shall pay to WTG the Occupancy Fee
set forth in each Collocate Schedule for the license to locate its Equipment in
the Space described therein.
The Occupancy Fee shall be payable in advance and without notice or demand
and without abatement, deduction, counterclaim or setoff commencing
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on the first day of the Term relevant to the license for the use of the Space
and on the first day of each calendar month thereafter during the Term, and any
month-to-month term if applicable (charges for partial months shall be
prorated). The Occupancy Fee shall be increased by any increases to the rental
incurred by WTG and required under the lease, if any, relevant to the Premises
in which the Space is located (the "Lease"). Customer shall pay to WTG its pro
rata share of any such increase based on the number of square feet of the Space
compared to the number of square feet leased by WTG under the applicable Lease.
Customer shall be liable to pay the increased Occupancy Fee when WTG becomes
liable for such payments under the applicable Lease. WTG shall notify Customer
of such increase as soon as practicable.
In addition, Customer shall be fully responsible for the prompt payment of
all federal, state or local taxes, however denominated, based on or calculated
with respect to the amounts payable by the Customer pursuant to this Agreement
(including but not limited to sales/use, rental and gross receipts taxes) and
all taxes (including, but not limited to franchise, income and miscellaneous
taxes) which are the liabilities of the Customer under (i) appropriate standard
industry practices (including telecommunications, fiber optic and rental
industries), (ii) applicable law and (iii) as otherwise agreed at any time
between Customer and WTG notwithstanding that the incidence thereof may be on
WTG; provided, however, the taxes on WTG's income and property shall be the
sole responsibility of WTG.
Customer agrees to indemnify, defend and hold WTG and WTG Affiliates
harmless from any liabilities, costs, expenses (including without limitation,
reasonable expenses of investigation and attorneys' fees and expenses),
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion by any taxing authority of any tax liability
or increase in tax liability which is an obligation of Customer arising under
this Agreement.
5. SERVICE FEE AND BUILD-OUT FEE. Customer shall pay to WTG for the
Services rendered pursuant to this Agreement the Service Fee set forth in each
Collocate Schedule (the "Service Fee"). The Service Fee shall be payable in
advance and without notice commencing on the first day of the Term relevant to
the license for the use of the Space and on the first day of each Calendar
month thereafter during the said Term, and any month-to-month term if
applicable (charges for partial months shall be prorated). The Service Fee
shall be paid without notice or demand and without deduction, counterclaim or
setoff.
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Customer shall also pay to WTG the amount set forth in each Collocate
Schedule as Customer's pro rata share of the cost of the improvements to the
Space required to be made by WTG in order to permit WTG to provide the Services,
excluding the Equipment (the "Build-out Fee"). The Build-out Fee shall be
payable to WTG as compensation for such costs upon Customer's execution of the
Collocate Schedule relevant to the Space in question. Upon payment of the
Build-out Fee, Customer shall be deemed to own such improvements during the Term
of the license relevant to the Space upon which such improvements are made.
Upon termination of the license, all of Customer's ownership rights in said
improvements shall automatically terminate and be of no further force or effect.
6. LANDLORD SERVICES. It is understood and agreed that WTG will not
directly provide any of the services provided by the landlord of the Premises in
which the Space is located (the "Landlord") to WTG under the appropriate Lease,
but rather all services provided by the Landlord to WTG will be made available
to Customer on the same basis as made available to WTG.
WTG does not warrant that the use of the Space will be free from any
interruptions for any reason whatsoever and WTG shall not be liable for any
failure of the Space to be fit for the purpose to which Customer intends to put
the Space.
7. INSURANCE. Customer and Customer's contractors, if any, shall be
required to provide and maintain at all times during the Term relevant to any
license granted hereunder, during any thirty day removal period pursuant to
Paragraph 8 of this Agreement and during any month-to-month term if applicable,
the following types of insurance in the following minimum amounts, which
insurance shall be issued by companies which have a best guide rating of at
least A-11. Irrespective of the requirements as to insurance to be carried, the
insolvency, bankruptcy, or failure of any such insurance for the Customer, or
the failure of any such insurance company to pay claims that occur shall not be
held to waive any of the provisions hereof.
a. Worker's Compensation Insurance complying with the law of the
state or states in which the work is to be performed, whether or not
Customer or its contractors are required by such laws to maintain such
insurance, and Employer's Liability insurance with the limit of $100,000
each occurrence; including all states except Nevada, North Dakota, Ohio,
Washington, Wyoming and West Virginia. If it is necessary to work in any of
the above mentioned states, Customer must participate in the state fund
established there and provide evidence of Stop Gap coverage.
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b. Commercial General Liability insurance with a combined single
limit of $1,000,000 each occurrence/$2,000,000 aggregate, against claims
for bodily injury, death, and property damage. Such policy shall include
coverage for all operations of Customer, including independent contractor's
coverage, blanket contractual liability and the policy will be endorsed to
eliminate exclusion of work, construction or demolition within fifty (50)
feet of railroad trackage; broad form property damage including completed
operations; and where applicable, property damage liability resulting from
blasting or explosion, collapse or structural injury and/or
subsurface operations. Such policy shall include no modifications that
reduce the standard coverages provided under a Commercial General Liability
policy form.
c. Business Automobile Liability insurance with a single limit
combined for bodily injury and property damage of $1,000,000 each
occurrence to include coverage for all owned, non-owned and hired vehicles.
d. Excess or Umbrella Liability coverage with a combined single
limit of $1,000,000 per occurrence to be excess of (a) through (c).
In the event coverage is denied or reimbursement of a properly presented
claim is disputed by the carrier for insurance provided in (a) through (d)
above, Customer shall, upon written request, provide WTG with a certified copy
of the involved insurance policy or policies within ten (10) business days of
receipt of such request, providing such disclosure shall not render the policy
void or voidable by insurer as to the coverages and any other respects.
WTG, WTG Affiliates and the Landlord shall not insure or be responsible
for any loss or damage to property of any kind owned or leased by the Customer
or its employees, servants and agents. Any policy of insurance covering the
Equipment owned or leased by Customer against loss by physical damage shall
provide that underwriters have given their permission to waive their rights
of subrogation against WTG, WTG Affiliates and the Landlord, their directors,
officers and employees, as well as their subsidiaries and affiliates,
including the directors, officers and employees thereof.
Customer and WTG hereby waive (and shall require of its contractors to
waive) all expressed and/or implied rights of subrogation and each party waives
all underwriters' rights of subrogation against such other
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party, its affiliates and the underlying Landlord, their shareholders, officers,
directors, agents and employees, and the officers, directors, agents and
employees of their corporate shareholders, providing such waiver of subrogation,
in writing prior to loss, shall not render insurance policies or coverages
void.
The foregoing insurance shall be evidenced to WTG and the Landlord by
certificates of insurance, with the exception of the Workers
Compensation Insurance policy, the Landlord shall be named as an additional
insured (the appropriate Landlord is identified in each Collocate Schedule)
which shall be delivered to WTG upon initial payment of the Build-out Fee. The
certificates of insurance shall show that the insurance is prepaid, and in full
force and effect and that such insurance shall not be cancelled, non-renewed or
decreased during the Term relevant to any license granted hereunder, or during
any month-to-month term if applicable, without at least thirty (30) days'
written notice to WTG. The maintenance of insurance by the Customer shall in no
way limit or affect the extent of the Customer's liability.
It is hereby agreed that the insurance requirements of this Paragraph 7
shall be the insurance requirements under this Agreement unless otherwise
required by the Landlord pursuant to the Lease relevant to the Premises in
question, in which event Customer hereby agrees to comply with the Landlord's
requirements under the Lease, as the Lease may be modified from time to time.
8. IMPROVEMENTS TO SPACE AND PREMISES; QUIET ENJOYMENT. In the
event Customer desires to make improvements to the Space which
improvements are deemed to be material and substantial as reasonably determined
by WTG ("Material Improvements"), Customer shall submit all plans and
specifications for such work to be performed in the Space to WTG for WTG's prior
written approval, which approval shall not be unreasonably withheld or delayed.
WTG shall submit all such plans and specifications for Material Improvements to
the appropriate Landlord for the Landlord's prior written approval. No
construction for Material improvements may commence until both of the foregoing
consents are obtained. Customer covenants and agrees that its use of the Space
will not interfere with WTG's use of its Premises or other tenants' use of their
premises in the building in which the Premises are located. WTG covenants and
agrees with Customer that WTG's use of the Premises and/or the use of the
Premises by WTG's other customers will not interfere with Customer's use of the
Space.
Customer shall not employ any contractor to perform Material Improvements
unless previously approved in writing by WTG which approval shall not be
unreasonably withheld (and approved in writing by the
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Landlord if required by the Lease). Customer and each contractor and
subcontractor participating in performing Material Improvements shall guarantee
that such work will be free from all mechanic's and/or material liens and free
from any and all defects in workmanship and materials for the period of time
which customarily applies in good contracting practice, but in no event for less
than one (1) year after the acceptance of the work by Customer and WTG. The
aforesaid guarantees of each such contractor and subcontractor and Customer
shall include the obligation to repair or replace in a thoroughly first-class
and workmanlike manner all defects in workmanship and materials without any
additional charge. All the Material Improvements shall be contained in the
contracts and subcontracts for performance of Customer's work and shall be
written so that they shall inure to the benefit of WTG and Customer as their
respective interests may appear. Such warranties and guarantees shall be so
written that they can be directly enforced by either Customer or WTG, and
Customer shall give to WTG any assignment or other assurance to effectuate the
same.
It shall be the Customer's responsibility to cause each of Customer's
contractors and subcontractors to maintain continuous protection of premises
adjacent to the Space in such manner as to prevent any damage to such adjacent
property by reason of the performance of Customer's work.
All of Customer's work shall be coordinated with all work being performed
or to be performed by WTG and other tenants of the building in which the
Premises are located. The contractor or subcontractor shall not at any time
damage, injure, interfere with or delay the completion of any other construction
within the building; and they and each of them shall comply with all procedures
and regulations prescribed by WTG and the Landlord of the Premises for
integration of Customer's work with the work to be performed in connection with
the construction of the building, and all other construction within the building
which comprises or contains the Premises.
All fixtures, alterations, additions, repairs, improvements and/or
appurtenances attached to or built into, on or about the Space prior to or
during the Term of the license relevant thereto, whether by WTG at its expense
or at the expense of Customer, or by Customer at its expense or by previous
occupants of the Space, shall be and remain part of the Space and shall not be
removed by Customer at the end of the Term of the license relevant to the Space.
Upon the termination or expiration of the Term relevant to the Space, WTG shall
allow Customer thirty (30) days from the date of such termination or expiration,
at Customer's sole cost and expense, to remove all trade fixtures (including,
but not limited to,
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equipment racks, rectifiers/chargers, batteries, AC power conditioning
equipment, telecommunication switching equipment, channel banks, etc.) installed
by Customer, provided that the Space is restored by Customer to its condition
before the installation of such items and that all such work (including
restoration) is performed in accordance with the other provisions of this
Agreement. If Customer shall fail to complete such removal and restoration,
within the aforesaid thirty (30) day time period, all such trade fixtures
remaining within the Space or at the Premises shall be the sole property of WTG.
All work affecting the Space shall be in compliance with all laws,
ordinances, rules, regulations, orders and directives of governmental and quasi-
governmental bodies and authorities having jurisdiction over the Premises and
the Space from time to time and Customer shall obtain and keep in effect all
licenses, permits and other authorizations required with respect to the business
conducted by Customer within the Space.
9. EMERGENCY PHONE NUMBERS. Customer shall provide WTG with means of
access to the Space and except in the case of an emergency, upon not less than
twenty-four (24) hours' notice, WTG shall have the right to enter the Space for
the purpose of inspecting the same. Customer shall, upon execution of this
Agreement, provide WTG with a twenty-four (24) hour maintenance number for
trouble notification and resolution by inserting said telephone number(s) in
the Collocate Schedule(s). In addition, Customer shall place such number at a
visible location outside the Space.
10. SOLE USE OF SPACE BY CUSTOMER. Customer acknowledges that it has
been granted only a license to occupy the Space and that it has not been granted
any real property interests in the Space and that neither this Agreement nor any
interest created herein will be assigned, mortgaged, subleased, encumbered or
otherwise transferred, and that neither the Space nor any part thereof will be
encumbered in any manner by reason of any act or omission on the part of
Customer, or used or occupied, or permitted to be used or occupied, by anyone
other than Customer. Any attempt to allow the use or occupation of the Space by
anyone other than Customer to assign, mortgage, sublease or encumber any rights
under this Agreement by Customer shall, unless otherwise agreed to in writing by
WTG, be void and in such event, WTG shall have the right to terminate this
Agreement as to any or all Space occupied by Customer. Such written agreement by
WTG shall be subject to the sole discretion of WTG.
11. DEFAULT. If any payment due pursuant to this Agreement shall remain
unpaid for a period of ten (10) days after the same shall become due and
payable, if Customer fails to perform or fulfill any other
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covenant or provision of this Agreement and any such matter is not remedied
within thirty (30) days after the receipt of written notice thereof from WTG or
if Customer should interconnect with any other party without written consent
from WTG pursuant to Paragraph 1 of this Agreement, then Customer shall be in
default under this Agreement and any license granted hereunder shall thereupon,
at WTG's sole option and by virtue of this express stipulation, expire and
terminate and be of no further force or effect as to any or all Space occupied
by Customer. In the event of default by Customer, Customer agrees to pay any
and all reasonable costs incurred by WTG in the enforcement of this Agreement,
including reasonable attorney's fees. Any extension of time granted to Customer
by WTG to cure a default shall be effective if made in writing. The granting of
such an extension by WTG or failure to act with respect to a default by Customer
or waiver of a default by Customer shall not constitute a permanent waiver by
WTG of its rights hereunder with respect to any future act or default by
Customer, which is the same or similar, or any failure to cure such default upon
the expiration of any extension granted by WTG to Customer.
Customer shall be in default under this Agreement if Customer is in default
under any other agreement between Customer and WTG, and Customer shall be in
default under any other agreement between Customer and WTG if Customer is in
default under this Agreement.
12. NOTICES. All notices, consents, and other communications required
or permitted hereunder shall be in writing and shall be mailed or delivered as
follows (or to such additional or other persons, at such other address or
addresses as any be designated by notice of the appropriate party.)
TO WTG: WILLIAMS TELECOMMUNICATIONS SERVICES, INC.
One Williams Center
P.O. Box 21348
Tulsa, Oklahoma 74121
Attention: Contract Administration
To Customer: Southern Interexchange Facilities, Inc.
------------------------------------------
113 South Main Street
------------------------------------------
P. O. Drawer E
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Arab, Alabama 35016
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Attention: Vice President, Network and
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General Counsel
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Mailed communications shall be sent by United States certified or
registered mail, postage prepaid or by a generally recognized overnight delivery
system such as Federal Express Service. Such communications shall be deemed
effective upon delivery to WTG or Customer, as the case may be, at their
respective addresses stated above.
13. LIMITATION OF LIABILITY AND INDEMNIFICATION.
(A) Except for actual damages to the Space and/or the Equipment knowingly
and willfully caused by WTG, its agents, employees or affiliated companies,
WTG's liability for damages incurred by Customer for any other cause whatsoever
shall be limited to the charges due WTG under this Agreement. As used in this
Subparagraph 13(A) the term "actual damages" shall mean the cost to restore the
Space to a state substantially similar to that which existed as of the
Commencement Date and the cost to repair the Equipment to a state of working
order or the replacement value of the Equipment if such damage renders said
Equipment beyond a reasonable state of repair.
(B) Neither Customer nor WTG shall be liable to each other for any
incidental, indirect, special, consequential, punitive or reliance damages of
any nature whatsoever regardless of the foreseeability thereof (including,
but not limited to, any claim from any client, customer or patron for loss of
services, lost profits or lost revenues) arising under or in connection with
this Agreement, or the performance thereunder, from any breach or partial breach
or potential breach of the provisions of this Agreement or arising out of any
act or omission by either WTG or Customer, their respective employees, servants
or agents whether based on breach of contract, breach of warranty, negligence or
any other theory of liability.
(C) Customer shall indemnify, defend and hold harmless WTG from any
claims, demands, actions, damages, liability, judgments, expenses and costs
(including attorneys' fees) arising from Customer's use of the Space or
Services, or the use by any third party (e.g., Customer's customers) of the
Space or Services (unless caused by WTG's willful misconduct), or by reason of
any breach or nonperformance of any covenant or obligation of Customer herein,
or the violation of any law or regulation by Customer. Customer's obligation to
assume, protect, defend, indemnify and save WTG harmless shall extend to WTG's
officers, directors, agents and employees of any corporate shareholder of WTG,
and shall continue for so long as any of the named indemnities may be subjected
to claims or suits calling for such obligations provided, however, that Customer
shall not be obligated to indemnify, defend or hold harmless WTG and the named
indemnitees from claims, demands, actions, damages, liability, judgments,
expenses and costs arising from or asserted by third parties against WTG on
account of
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physical property damage to such third party's property located upon the
Premises (exclusive of the Space) or personal injury to such third party to the
extent such damage is caused by any negligence or willful misconduct of WTG or
its agents or employees.
(D) WTG shall have no liability of any kind whatsoever to any person,
firm or entity for any act or omission of WTG, its agents or employees excepting
and only as follows: WTG, at its own expense will indemnify Customer and hold
Customer harmless with respect to any and all loss, damage, liability or expense
asserted against Customer by a third party on account of any physical property
damage to such third party's property located upon the Premises (exclusive of
the Space) or personal injury to such third party to the extent caused by the
negligence or willful misconduct of WTG or its agents or employees arising out
of WTG's performance of this Agreement. WTG's obligation to indemnify and hold
Customer harmless shall extend to Customer's officers, directors, employees,
agents and employees of any corporate shareholders of Customer, and shall
continue for so long as any of the named indemnities may be subject to claims or
suits calling for such obligations.
14. USE. At any time during the term of this Agreement, WTG may, at
WTG's sole option, immediately terminate this Agreement if Customer is not then
maintaining the Equipment solely for the purpose of originating and/or
terminating telecommunications transmissions carried over the WTG Network.
Customer further understands and agrees that WTG shall only respond to requests
by WTG interexchange service customers (as designated in writing by Customer to
WTG from time to time) to interconnect the Equipment with the WTG Network and
the specifics regarding each interconnection, including but not limited to the
operating performance of each interconnection. Nothing provided for herein shall
exclude Customer from becoming an interexchange service customer of WTG. If,
however, Customer is a party for which WTG is maintaining an interconnection
between the WTG Network and the Equipment, then customer shall at all times
maintain not less than $10,000.00 per month in current charges from WTG for
----------
interexchange service capacity and for which at least a portion of such
interexchange capacity originates and/or terminates in the Space in question. If
Customer is such a sole interconnect party and fails to maintain $l0,000.00 per
----------
month or more in current charges, WTG shall have cause, at its sole option and
upon ninety (90) days advance written notice to Customer, to terminate this
Agreement with respect to the Space in question.
15. EMINENT DOMAIN. In the event of a taking by eminent domain (or a
conveyance by any Landlord of all or any portion of the Premises to an entity
having the power of eminent domain after receipt of actual
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notice of the threat of such taking) of all or any portion of the Premises so as
to prevent, in WTG's sole discretion, the utilization by Customer of the Space
in the Premises, this Agreement shall terminate as of the date of such taking or
conveyance and the Occupancy Fee and Service Fee paid or to be paid by Customer
shall be reduced accordingly. Except as set forth below, Customer shall have no
claim against WTG for the value of the unexpired Term of the license affected
thereby (or any portion thereof) or any claim or right to any portion of the
amount that might be awarded to the Landlord of the Premises or WTG Affiliates
as a result of any such payment for condemnation or damages. Nothing contained
in this Agreement should prohibit Customer from seeking any relief or remedy
against the condemning authority in the event of an Eminent Domain proceeding or
condemnation which affects the Space.
16. DAMAGE TO PREMISES. If the building in which the Premises are located
is damaged by fire or other casualty, WTG shall give immediate notice to
Customer of such damage. If a Landlord or WTG Affiliate exercises an option to
terminate a particular Lease due to damage or destruction of the Premises
subject to such Lease, or such WTG Affiliate decides not to rebuild such
building or portion thereof in which the Space is located, this Agreement shall
terminate as of the date of such exercise or decision as to the affected Space
and the Occupancy Fee and Service Fee paid by Customer shall be modified
accordingly. If neither the Landlord of the affected Premises nor the WTG
Affiliate exercises the right to terminate, WTG Affiliates shall repair the
particular Space to substantially the same condition it was in prior to the
damage, completing the same with reasonable speed. In the event that such WTG
Affiliate shall fail to complete the repair within a reasonable time period,
Customer shall thereupon have the option to terminate this Agreement with
respect to the affected Space, which option shall be the sole remedy available
to Customer against WTG and WTG Affiliates under this Agreement relating to such
failure. If the Space or any portion thereof shall be rendered untenable by
reason of such damage, the Occupancy Fee and Service Fee for such Space shall
proportionately abate, based on the amount of square footage which is rendered
untenable, for the period from the date of such damage to the date when such
damage shall have been repaired for the portion of the Space rendered untenable.
Customer shall have the option to terminate this Agreement at any time after the
expiration of thirty (30) days from the date of the fire or casualty affecting
the Space, if WTG fails to inform Customer in writing of its decision to rebuild
or repair the Space.
17. SUBORDINATION. Customer hereby agrees that this Agreement shall be
subject and subordinate to any mortgage, trust deed or deed of trust or lease
that has heretofore been or may hereafter be placed upon
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the Premises wherein the Space is located, or any part thereof. Any license
granted hereunder shall not be granted in controvention of any mortgage, trust
deed or deed of trust or lease pursuant to the underlying lease or the same
shall be voidable by WTG.
18. LIEN ON EQUIPMENT. WTG shall have no rights to or interest in the
Equipment other than statutory rights granted a landlord with respect to the
property of a tenant (commercial or residential). In all other respects, the
Equipment shall remain the sole property of Customer. However, in the event
Customer fails to pay WTG for amounts due hereunder and is in default of this
Agreement, WTG shall have a lien upon the Equipment and all other personal
property of the Customer which may be located in or upon the Premises. Such
lien, subject to the rights of third parties, if any, with security interests in
the Equipment, may be enforced by WTG for Customer's failure to pay amounts due
hereunder by the taking and selling of such Equipment and/or property, said sale
to be made upon thirty (30) days' written notice served upon the Customer, or
such lien may be enforced in any other manner at the sole option of WTG. The
lien provided for herein shall not be recordable as a security interest in the
Equipment and shall only arise in the event Customer is in default of this
Agreement.
19. ASSIGNMENT -- CHANGE IN CONTROL. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors or assigns. Except as security for financing or in connection with
the enforcement of the security interests so granted, Customer shall not assign
or transfer this Agreement to any third party which is not an existing affiliate
or subsidiary of Customer as of the date of this Agreement without the prior
written consent of WTG, which consent may be granted or withheld at the sole
discretion of WTG. A transfer or assignment of this Agreement shall include a
sale of all or substantially all of the assets of Customer or a change in
control of Customer. "Change in control" means that (i) a person, corporation,
entity or group acquires, directly or indirectly, the beneficial ownership of
50% or more of the issued and outstanding stock of Customer in a single or
series of transactions, or (ii) Customer is a party to a merger, consolidation
or similar transaction and following such transaction 50% or more of the issued
and outstanding securities of Customer are beneficially owned by said person,
corporation, entity or group. In the event Customer shall require the
purchaser, as a condition of such sale, to agree that the purchaser will assume
this Agreement and continue to perform all of the obligations of the Customer
under this Agreement. With respect to a change in control of Customer, this
Agreement shall continue in force and the parties shall continue to perform
their respective obligations and
14 of 16
<PAGE>
Contract K-177
retain their respective rights in accordance with the terms and conditions
specified herein.
20. ENTIRE AGREEMENT MODIFICATION OF AGREEMENTS. This Agreement and the
Collocate Schedule(s) identified herewith and made a part hereof contain all
agreements of the parties with respect to the Space delineated in each
Collocate Schedule. No prior agreement or understanding pertaining to
such Space shall be effective. This Agreement may be modified in writing only
when signed by the parties in interest at the time of modification. Customer
specifically acknowledges that neither WTG nor any agent or employee of WTG has
made any representations, warranties or promises except as herein expressly set
forth in this Agreement and the Collocate Schedule(s) identified herewith.
21. NO WAIVERS. A waiver by either party of any of the covenants or
agreements hereof to be performed by the other party shall not be construed to
be a waiver of any succeeding breaches thereof or of any other covenants or
agreements herein contained to be performed by the other party.
22. EFFECT OF UNENFORCEABLE PROVISIONS. A determination by a court of
competent jurisdiction that any provision of this Agreement or any part hereof
is illegal or unenforceable shall not cancel or invalidate the remainder of such
provision or other provisions of this Agreement which shall remain in full force
and effect.
23. NATURE OF RELATIONSHIP OF PARTIES. Nothing contained herein shall be
deemed to create a relationship between Customer and WTG of employer and
employee, master and servant, principal and agent, contractor and subcontractor,
co-venturers, partners or any similar relationship within the meaning of any law
or otherwise. This Agreement shall not constitute either party as the agent for
or principal of the other.
24. REPRESENTATIONS AND WARRANTIES. Each party represents and warrants
that it has taken all requisite corporate or partnership action to approve
execution, delivery and performance of this Agreement and that this Agreement
constitutes a legal, valid and binding obligation enforceable against it in
accordance with its terms.
15 of 16
<PAGE>
Contract K-177
25. GENERAL PROVISIONS. (A) The Space provided hereunder is subject to
the condition that it will not be used for any unlawful purpose; (B) This
Agreement shall be construed under the laws of the State of Oklahoma without
regard to choice of law principles; (C) 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; (D) Descriptive headings in
this Agreement are for convenience only and shall not affect the construction of
this Agreement; (E) 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; (F) No rule of construction requiring
interpretation against the draftsman hereof shall apply in the
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
WILLIAMS TELECOMMUNICATIONS
SERVICES, INC.
with and on behalf of
WTG Affiliates Southern Interexchange Facilities, Inc.
---------------------------------------
(Customer)
BY: /s/ C.M.Cole BY: /s/ Melvin R.Patterson
------------------------- ------------------------------------
(Signature) (Signature)
C.M. Cole Melvin R. Patterson
------------------------- ------------------------------------
(Print Name) (Print Name)
Vice President Vice President
------------------------- ------------------------------------
(Title) (Title)
16 of 16
<PAGE>
Contract No. K-177
---------
Schedule No. K-177A
---------
Amendment No. N/A
--------
Page 1 of 7
Collocate Schedule
------------------
This Collocate Schedule is made this 7th day of January, 1991, and
----- ------- --
subject to all definitions, terms and conditions of the Collocate Agreement
dated January 7, 1991, between Williams Telecommunications Services, Inc.
--------- --
("WTG"), a wholly owned subsidiary of Williams Telecommunications Group, Inc.
with and on behalf of WTG Affiliates and Southern Interexchange Facilities, Inc.
---------------------------------------
("Customer").
1. Premises:
---------
Williams Telecommunications Group
--------------------------------------------------
525 North Court Street
--------------------------------------------------
Montgomery, AL 36104
--------------------------------------------------
--------------------------------------------------
2. WTG Affiliate: WTG - East , Inc.
-------------- --------------------------------------------------
3. Initial Term: Equal to the period between the Commencement Date
------------- and the Termination Date
--------------------------------------------------
Commencement Date: February 1, 1991
------------------ --------------------------------------------------
Termination Date: January 31, 1992
----------------- --------------------------------------------------
4. Renewal Period(s): None
------------------ --------------------------------------------------
5. Occupancy and Services Charges:
-------------------------------
Occupancy Fee: $ 26.00 per month ( 20 square feet = 1 Rack)
-------- --------
Service Fee: $ 124.00 per month.
--------
Build-out Fee: $ 2,500.00 payable upon execution of Collocate
------------
Schedule.
<PAGE>
Contract No. K-177
----------
Schedule No. K-177A
----------
Amendment No. N/A
---------
Page 2 of 7
6. Customer 24 Hour Maintenance Number: (205) 586-1500
------------------------------------ --- --------
7. Landlord Information: None
---------------------
8. Special Terms and Conditions:
----------------------------
A) The Service Fee shall be subject to an annual increase which shall be
the current Service Fee prices, generally available to any WTG customer.
9. WTG will provide the services and improvements at the Space described
herein as set forth in Exhibit I which is identified with this Collocate
Schedule and subscribed to by Customer and WTG.
10. Customer agrees to abide by the specifications set forth in Exhibit II
which is identified herewith and subscribed to by the Customer and WTG.
<PAGE>
Contract No. K-177
--------
Schedule No. K-177A
--------
Amendment No. N/A
--------
Page 3 of 7
11. Delineation of Space: Montgomery, AL
---------------------
[GRAPHIC OF BUILDING BLUEPRINT APPEARS HERE]
WILLIAMS TELECOMMUNICATIONS
SERVICES, INC.
with and on behalf of
WTG AFFILIATES Southern Interexchange
--------------------------------
(Customer)
BY: /s/ C. M. Cole BY: /s/ Melvin R. Patterson
-------------------------------- --------------------------------
(Signature) (Signature)
C. M. Cole Melvin R. Patterson
-------------------------------- --------------------------------
(Print Name) (Print Name)
Vice President Vice President
-------------------------------- --------------------------------
(Title) (Title)
<PAGE>
Contract No. K-177
--------
Schedule No. K-177A
--------
Amendment No. N/A
-------
Dated January 7, 1991
----------------
Page 4 of 7
EXHIBIT I
SERVICE EXHIBIT TO COLLOCATE SCHEDULE
1. Backup DC electrical power, including batteries and shared use of an
emergency generator to the extent such generator exists and is maintained
to support the Premises.
2. Halon or Sprinkler System.
3. DC power adequate for Customer's consumption for 20 AMPs.
--
4. Single or A & B DC power cable feed for a maximum requirement of AMPs. A &
B DC power feed must be specifically requested.
5. AC power and outlets for test equipment.
6. Lighting.
7. Ground buss and cable interconnect.
8. Cable ladder racks to support the interconnect and power cables to
Customer's Space.
9. Interconnection between WTG and Customer on WTG end only.
10. Buildout of walls, floors and ceiling according to building standard
specifications.
11. Heating, ventilating and air conditioning adequate to handle up to
10,000 watts of power dissipation per location. An additional pro rata
charge for usage in excess of 10,000 watts dissipation per location will be
assessed.
12. General and administrative services directly relating to the
provision of the above listed Services.
<PAGE>
Contract No. K-177
--------
Schedule No. K-177A
--------
Amendment No. N/A
-------
Dated January 7, 1991
---------------
Page 5 of 7
EXHIBIT II
STANDARD SPECIFICATIONS EXHIBIT
TO COLLOCATE SCHEDULE
The following are standard specifications for collocate space provided at
various locations by a subsidiary of Williams Telecommunications Group, Inc.
(WTG). The Customer is hereby notified of, and shall comply with, these
specifications as conditions of collocation.
I. AC Power
A. A 20-amp four-plex AC receptacle will be provided in each caged
collocate area and for every third relay rack per relay-rack lineup. The
AC protective grounds serving all 120V AC electrical convenience
receptacles and direct-wired peripheral equipment located in the
isolated ground zone (IGZ) should be connected directly to the ground
window busbar (GWB). These conductors shall be sized in accordance with
normal "green wire" criteria and, for identification purposes, both ends
of each appearance shall be marked with a single-width, two-layer wrap
of yellow plastic tape. In addition, tags shall be used at the GWB
connection and at each terminating point to indicate the green wire is a
"GWB isolated ground wire." All such circuits must terminate in Isolated
#5262-IG orange receptacles. These receptacles have green wire ground
lugs that are electrically isolated from their metal mounting tabs.
NOTE: The master ground bar (MGB) is the common ground point between the
ground grid and all other grounding connections. With this procedure,
the intent of the National Electric Code (NEC) common grounding via the
MGB-GWB distribution panel connection is observed. If strict adherence
to the NEC prevents green wire connection directly to the GWB, the green
wire serving these receptacles may be routed through (but not grounded
to) the nearest panel board or breaker box, then brought to the GWB
ground.
<PAGE>
Contract No. K-177
--------
Schedule No. K-177A
--------
Amendment No. N/A
-------
Dated January 7, 1991
---------------
Page 6 of 7
II. DC Power
A. Nominal 50 + 6V DC battery and charger supply with a minimum of four-
-
hour reserve will be provided by the Service Provider.
B. All DC power conductors shall be sized for a maximum of l.25V DC drop
from the WTG power distribution panel to the customer equipment. If an
intermediate distribution bay is provided, this is divided .75V from
WTG to intermediate and .5V from intermediate to customer.
C. A low-voltage (46V) and high-voltage (57V) battery alarm will be
monitored by the Service Provider.
D. Redundant chargers of adequate size will be provided by WTG so that in
the event of a charger-failure the full load will be supplied to
customers' equipment. A charger-failure alarm will be monitored by the
Service Provider.
III. Grounding
A. A separate, insulated GWB will be provided by WTG in the IGZ.
B. The grounding conductor supplied by WTG between the MGB and the GWB
shall be equal in size, or larger than, the largest conductor.
C. The resistance of the conductor between the MGB and GWB shall be less
than, or equal to, 0.0005 ohms and comply with Item III.B.
D. All relay racks will be isolated from ground using insulators, pads and
bushings, if required by WTG.
E. All cable racks will be insulated from the walls, ceiling, fencing,
and building structure. In addition, cable racks entering the IGZ will
be electrically isolated from those within the IGZ using insulators and
bushings when required by WTG.
<PAGE>
Contract No. K-177
-------
Schedule No. K-177A
-------
Amendment No. N/A
------
Dated January 7, 1991
---------------
Page 7 of 7
IV. Environmental
A. The ambient temperature will be maintained by WTG between 60-80 degrees
F with an objective of 20-65% humidity. The equipment should be
designed to operate satisfactorily between 40-100 degrees F with 5-95%
(non-condensing) humidity. Low (4O degrees F) and high (l00 degrees F)
temperature alarms will be monitored by the Service Provider.
B. All concrete floors will be covered with vinyl tile and maintained with
anti-static wax.
V. Interconnection
A. The Customer will terminate its end of the interconnect.
B. All cables required to interconnect to the Customer will be provided by
WTG.
<PAGE>
[LOGO OF WILTEL APPEARS HERE]
DIGITAL SERVICE DESCRIPTION
FORM 03-CUB-1010 REV 2/92 (CARRIER SERVICE ONLY) WilTel SO #_____________
WilTel, Inc. agrees to provide and Customer agrees to accept the Service
described below for the Service Commitment Period and change below subject to
the terms and conditions contained in WilTel Digital Service Agreement with
Customer DSA # 517-91071. Customer agrees that terms that do not conform with
the terms of said Agreement or WilTel published terms, including but not limited
to City and Circuit availability, Requested Service Dates and Charges for the
Service shall not be binding on WilTel and are objected to until accepted by an
Authorized Headquarters Representative of WilTel.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Billing Name DELTACOM WXX # NYI-21485
------------------------------------------------------------------ --------------------------------------------
Billing Address Customer # 51371
--------------------------------------------------------------- ---------------------------------------
Service Commitment Period
- ------------------------------------------------------------------------------- -------------------------
Billing Contact Phone ( ) 12 Months
------------------------------- ------------------- --------------------------------------------------
Order Contact Mel Patterson Phone (205) 586-1301 Requested Service Date 8/1/94
--------------------------------- ------------------- ---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ORDER TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
New [_] Change [_] Disconnect [_] Cancel [_] Supplement [_] #
------------------------------------------------
Remarks/Reason
-------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EXPEDITE REQUEST
- ------------------------------------------------------------------------------------------------------------------------------------
The above listed Requested Service Date represents an expedited interval. This is customer authorization for a WilTel internal
expedite and/or Local Exchange Carrier expedite. Signed in advance by: ___________________________________________________________
Customer Signature/Title/Date
- ------------------------------------------------------------------------------------------------------------------------------------
WilTel CHARGES
- ------------------------------------------------------------------------------------------------------------------------------------
Interexchange Service LOCATION A LOCATION Z
11DC-3 CKT Qty/Type BRHM, AL JCVL, FL
- ------------------------------- --------------------------------- --------------------------------------------------
$ 15,666 Single Circuit IXC Monthly Charge $ 15,666 Total Monthly IXC
------------------------------ -----------
$ 0 Single Circuit IXC Installation $ 0 Total IXC Installation
------------------------------ -------------
373 Miles V&H Mileage [_] Route Mileage [_] $ .0625 Voice Grade Equivalent
- ------------------------- -----------
Monthly Recurring Ancillary Charges/Description
$______________________________ __________________________________________________________________________________________________
$______________________________ __________________________________________________________________________________________________
$______________________________ __________________________________________________________________________________________________
Non-Recurring Ancillary Charges/Description
$______________________________ __________________________________________________________________________________________________
$______________________________ __________________________________________________________________________________________________
$______________________________ __________________________________________________________________________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
ESTIMATED LOCAL ACCESS CHARGES
- ------------------------------------------------------------------------------------------------------------------------------------
LOCATION A____________________________________________________ LOCATION Z________________________________________________________
Local Access Billed By WilTel [_] LEC [_] Local Access Billed By WilTel [_] LEC [_]
Monthly Recurring/Description Monthly Recurring/Description
$_______________________ ___________________________________ $_______________________ _______________________________________
$_______________________ ___________________________________ $_______________________ _______________________________________
$_______________________ ___________________________________ $_______________________ _______________________________________
Non-Recurring/Description Non-Recurring/Description
$_______________________ ___________________________________ $_______________________ _______________________________________
$_______________________ ___________________________________ $_______________________ _______________________________________
$_______________________ ___________________________________ $_______________________ _______________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
Remarks Renew the existing DS-3 CKT (NYI-21485) for a 12 month term effective 8/1/94. IXC MRC will be $15,666.
---------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
IN WITNESS WHEREOF the parties have executed this Service Description on the __________ day of _________________________, 19______.
- ----------------------------------------------------------------- ---------------------------------------------------------------
Sales Representative Signature Customer Name
/s/ Mel Patterson
- ----------------------------------------------------------------- ---------------------------------------------------------------
Sales Management Authorized Representative Signature
---------------------------------------------------------------
Order Contact Signature
Headquarters Acceptance:
- -----------------------------------------------------------------
Authorized [_] Customer Acknowledges 3rd Party Testing.
- ----------------------------------------------------------------- Signature
Title ------------------------------------------------------
</TABLE>
<PAGE>
CUSTOMER NOTIFICATION AND CONSENT TO
CHANGE OF CONTROL OF COLLOCATE AGREEMENT
LICENSOR: Williams Telecommunications Services, Inc. ("WilTel")
LICENSEE / CUSTOMER: Southern Interexchange Facilities, Inc. ("SIF") /
DeltaCom, Inc. ("DeltaCom")
COLLOCATE
AGREEMENT: Contract K-177
DATED: January 7, 1991
PREMISES: Williams Telecommunications Group
525 North Court Street
Montgomery, AL 36104
Schedule No. K-177A.
NEW OWNERS: ITC Holding Company, Inc., a Delaware corporation ("ITC")
1. On December 31, 1993, SIF merged into DeltaCom. The management, owners, and
day to day operations for SIF remained the same under the name DeltaCom, Inc.
2. On October 27, 1995, the stockholders of DeltaCom entered into an agreement
with ITC that will result in the sale of 100% of DeltaCom, Inc.'s stock. ITC
does not have an existing long distance telephone operation and intends that
DeltaCom shall continue to operate as an on-going business upon the
consummation of the contemplated transaction which is expected to close
January 6 or 7, 1996.
3. Therefore, as referenced in the paragraph 19, entitled "ASSIGNMENT -- CHANGE
IN CONTROL" on page 14 of the aforementioned agreement, DeltaCom requests
approval of WilTel of DeltaCom's intent to change control and WilTel's
consent to continue DeltaCom's rights and obligations under this Agreement
under the new ownership of ITC.
Williams Telecommunications Service, Inc. DeltaCom, Inc.
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ Tom Mullis
---------------------------- -------------------------
Its: VP - Data:Broadband Its: EXEC. V.P.
--------------------------- ------------------------
Date: 1-10-96 Date: DEC. 13, 1995
-------------------------- -----------------------
<PAGE>
EXHIBIT 10.41
STATE OF SOUTH CAROLINA )
) AGREEMENT
COUNTY OF RICHLAND )
AGREEMENT ("Agreement") entered into the 14th day of January, 1997 by and
between SCANA Communications, Inc. ("SCI"), f/k/a MPX Systems, Inc. , and
DeltaCom, Inc. ("DeltaCom").
1. Recitals.
--------
a. SCI is in possession of certain space on the twentieth (20th)
floor of the Palmetto Center, 1426 Main Street, Columbia, South Carolina
(referred to hereinafter as the "POP") SCI connects to a larger
telecommunications network ("Network") via its telecommunications equipment
located at the POP.
b. SCI and DeltaCom are entering into this Agreement in which SCI
will allow DeltaCom to access the Network, house its communications equipment
("Network Access Equipment") and lease space in a portion of the POP described
above.
2. Existing Leases.
---------------
a. Pursuant to a "Commercial Sublease" dated May 15, 1996 (the
"Master Lease") by and between South Carolina Electric & Gas Company ("SCE&G"),
as lessor, and SCI, as lessee, attached hereto as Exhibit A, SCE&G has granted
to SCI the right to utilize the premises that includes the POP. SCI shall use
reasonable efforts to comply with its obligations pursuant to the terms of the
Master Lease and shall deliver to DeltaCom copies of every notice
1
<PAGE>
of default, nonrenewal and nonperformance received from SCE&G immediately upon
receipt thereof, and DeltaCom shall have the right, but not the obligation, to
cure any such defaults of SCI under the Master Lease, assuming that SCI is
either unwilling or unable to cure such defaults itself. SCI covenants that it
will not amend the terms of the Master Lease if any said amendment would
materially adversely affect DeltaCom's rights or duties pursuant to this
Agreement.
b. Real Property Lease. Pursuant to a "Lease Agreement" dated October
-------------------
1, 1993 (the "Real Property Lease") by and between Main Street Associates, as
lessor, and SCE&G, as lessee, attached hereto as Exhibit B, Main Street
Associates has leased certain property, including the premises that includes the
POP, to SCE&G.
3. Use. Subject to the provisions and conditions and for the term set
---
forth herein , SCI hereby leases space consisting of four thousand eight hundred
and fifty-three (4,853) rentable square feet, or Four Thousand Two Hundred and
Fifty-Seven (4,257) usable square feet, on the 20th floor of the Palmetto Center
(the "Leased Space") to DeltaCom. A description of the Leased Space is included
in Exhibit C, which is attached hereto and incorporated herein. SCI authorizes
DeltaCom to locate DeltaCom's Network Access Equipment in the Leased Space for
the purposes of providing communications services and accessing the Network.
DeltaCom's Network Access Equipment is more fully described in Exhibit D which
is attached hereto and incorporated herein by reference. The Leased Space shall
be used by DeltaCom only for the location, operation, installation, removal,
replacement and maintenance of DeltaCom's Network Access Equipment described in
Exhibit D pursuant to the terms of this Agreement. DeltaCom
2
<PAGE>
agrees to install equipment of a type that will not cause interference with or
in any way harm or damage existing providers of communications services (both
wireless and wireline) and/or their equipment present at the POP at the time of
DeltaCom's installation.
4. Term.
----
a. Initial Term. This Agreement shall be for an initial term of five
------------
(5) years beginning on the date of this Agreement (the "Initial Term").
b. Extension of Term. DeltaCom shall have the option to extend the
-----------------
term of this Agreement for additional one (1) year periods (collectively, the
"Extension Terms" and, individually, the "Extension Term") subject to both the
Master Lease and the Real Property Lease remaining in effect. The parties
expressly understand and agree that, under no circumstances, shall DeltaCom's
rights under this Agreement extend beyond expiration or termination of either
the Master Lease or the Real Property Lease. This option to extend the term of
this Agreement shall be deemed automatically exercised without notice by
DeltaCom to SCI unless DeltaCom gives SCI written notice of its intent not to
exercise such option at least three (3) months prior to the end of the then-
current term. Except as provided herein, all terms and conditions of the
Agreement shall remain in full force and effect during the Extension Term(s).
If DeltaCom should continue to occupy the Leased Space after the
termination of the Term (as defined below) without the exercise of its option to
extend the Term or the execution by SCI and DeltaCom of a new agreement, then
DeltaCom shall be deemed to be occupying such space on a month-to-month basis
(the "Holdover Term"), subject to all of the
3
<PAGE>
covenants and conditions of this Agreement and at a monthly charge of one and
one-quarter (1.25) the total per month charge payable immediately prior thereto.
Notwithstanding the foregoing, SCI has no obligation to allow DeltaCom to
continue to occupy the Leased Space during the Holdover Term and may evict
DeltaCom at any time after ten (10) days prior written notice, during such
Holdover Term.
The Initial Term, the properly exercised Extension Term(s) and the
Holdover Term are collectively referred to as the Term.
5. Charges.
-------
a. The Annual Charge for the Initial Term and the Extension Term(s)
shall be equal to the total of all charges to SCI for the Leased Space pursuant
to the Master Lease. This amount is currently Seventy Seven Thousand Six Hundred
Forty Eight Dollars ($77,648.00), but will change in accordance with the terms
of the Master Lease. The Annual Charge is to be paid in equal monthly
installments on the first day of each month during the Initial Term and the
Extension Term(s) of this Agreement.
b. DeltaCom hereby covenants and agrees to pay when due all Annual
Charges due to SCI hereunder at SCI's principal office at 440 Knox Abbott Drive,
Suite 240, Cayce, South Carolina, 29033.
6. Services. SCI shall arrange for heat, air-conditioning and ventilation
--------
to the enclosed areas of the Leased Space in which DeltaCom's Network Access
Equipment is located on the same basis as is provided to SCI's facilities
located in the same area. Air conditioning
4
<PAGE>
will be provided to dissipate approximately 10,000 BTU/hour. Any additional or
supplementary heating and cooling systems required or desired by DeltaCom and
approved by SCI shall be installed at DeltaCom's cost. SCI will cause electric
power to be available in the Leased Space for DeltaCom in the amount of 600 amps
at 480 volts. The transforming and transmission of the electricity to the
improved space for DeltaCom shall be the responsibility of DeltaCom. The
furnishing of heat and air-conditioning shall be subject to any statute,
ordinance, rule, regulation, resolution or recommendation for energy
conservation which may be promulgated by any governmental agency or organization
which SCI shall be required to abide by or which it may in good faith elect to
abide by.
7. Access. DeltaCom and its employees shall have access to its equipment
------
24 hours a day, 365 days a year, subject to compliance with such reasonable
security measures as shall be in effect from time to time for the POP in
general. SCI shall have access to its equipment located in the Leased Space at
all times to enable it to inspect or examine the same and to make repairs,
additions and alterations to the said equipment as SCI may deem advisable to
preserve the integrity, good order and safety of the POP. The above
notwithstanding, no party shall have access to DeltaCom's equipment except in
the presence of a DeltaCom representative after reasonable notice to DeltaCom.
8. Condition of Premises. Except as otherwise provided herein, DeltaCom
---------------------
shall at its own cost keep the Leased Space and DeltaCom's Network Access
Equipment in safe and good condition, except for such structural repairs as are
SCI's obligations hereunder.
5
<PAGE>
9. Surrender. At the termination of this Agreement for any reason,
---------
DeltaCom shall remove its Network Access Equipment and any other of DeltaCom's
goods and effects, and quit and deliver up the Leased Space to SCI peaceably and
in as good order and condition as at the commencement of this Agreement (or as
thereafter improved), reasonable wear and tear and damage by fire or other
casualty or repairs which are SCI's obligation hereunder excepted. DeltaCom's
Network Access Equipment and other goods and effects not removed by DeltaCom at
termination, after ten (10) days prior written notice to DeltaCom during which
time period DeltaCom may remove said equipment, goods, and effects, are
considered abandoned and SCI may without further notice to DeltaCom treat the
same as its own and without cost or charge to SCI use, dispose and/or store same
as it desires, any reasonable cost of disposal or storage to be chargeable to
DeltaCom.
10. Repairs. SCI shall be responsible only for making structural repairs
-------
to the Leased Space and for making repairs to facilities and equipment located
outside of but furnishing service to the Leased Space. SCI shall provide
DeltaCom reasonable notice of SCI's intention to perform repairs to the Leased
Space which in any way may negatively impact the operation of DeltaCom's Network
Access Equipment.
11. Limitation Regarding Services. SCI reserves the right, without any
-----------------------------
liability to DeltaCom and without being in breach of any covenant of this
Agreement, upon reasonable notice to DeltaCom, to interrupt or suspend service
of any of the heating, ventilating, air-conditioning, electric or other systems
serving the Leased Space, or the rendition of any of the
6
<PAGE>
other services required of SCI under this Agreement, whenever, and for so long
as may be necessary by reason of accidents, emergencies, strikes or the making
of the repairs or changes which SCI is required by this Agreement or by law to
make or in good faith deems advisable or by reason of difficulty in securing
proper supplies of fuel, steam, water, electricity, labor or supplies, or by
reason of any other cause beyond SCI's reasonable control, including without
limitation, mechanical failure and governmental restrictions on the use of
materials or the use of any of the POP systems.
12. Governmental Requirements and Approvals. DeltaCom shall at all times
---------------------------------------
comply with any and all Federal, State and local statutes, regulations,
ordinances and other requirements of any of the constituted public authorities
and of all insurance underwriters, relating to its use and occupancy of the
Leased Space. Further, SCI shall cooperate with DeltaCom and DeltaCom's efforts
to obtain and maintain in effect all certificates, permits, licenses and other
approvals required by governmental authorities for DeltaCom's use of the
Leased Space. The obligations of SCI as set forth herein shall continue
throughout the term of this Agreement.
13. Signs. DeltaCom shall not place signs on the exterior or interior of
-----
the POP except with the approval of the SCI.
14. Care; Insurance. DeltaCom shall not overload, damage or deface the
---------------
Leased Space or do any act which might make void or voidable any insurance on
the Leased Space or
7
<PAGE>
which may render an increased or extra premium payable for insurance (and
without prejudice to any right or remedy of SCI regarding this paragraph, SCI
shall have the right to collect from DeltaCom, upon demand, any such increase or
extra premium).
15. Alterations; Additions. DeltaCom shall not make alterations of or
----------------------
additions to the Leased Space without the prior written approval of SCI. Said
approval shall not be unreasonably withheld for nonstructural alterations,
provided reasonably detailed plans and specifications for the work are furnished
to SCI.
16. System Changes. DeltaCom shall not exceed the capacity of any of the
--------------
electrical conductors and equipment in the Leased Space and shall not install
any equipment of any kind or nature whatsoever which would or might necessitate
any changes, replacements or additions to (or which might cause damage to) the
plumbing system, the heating system, air-conditioning system, electrical system
or any other system serving the Leased Space without the prior written consent
of SCI.
17. Assignment; Delegation. This Agreement may not be sold, assigned,
----------------------
transferred or delegated by DeltaCom without the written consent of SCI, which
consent will not be unreasonably withheld.
18. Fire or Other Casualty. In the event of damage to the Leased Space or
----------------------
those portions of the POP providing access or essential services thereto, by
fire or other casualty, SCI
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shall at its expense cause the damage to be repaired to a condition as nearly as
practicable to that existing prior to the damage, with reasonable speed and
diligence. SCI shall not, however, be obligated to restore or rebuild the Leased
Space to a condition in excess of the condition of the Leased Space at the time
of the commencement of this Agreement, nor in any event to repair, restore or
rebuild any of DeltaCom's Network Access Equipment, or any alterations or
additions made by DeltaCom after commencement of the term of this Agreement. To
the extent and for the time that the Leased Space is rendered uninhabitable, the
Annual Charges set forth above shall proportionately abate. In the event the
damage shall involve the Leased Space or the POP generally and shall be so
extensive that SCI shall decide not to repair or rebuild the Leased Space and/or
the POP, this Agreement shall, at the option of either party, exercisable by
written notice to the other party given within sixty (60) days thereof, be
terminated as of a date specified in such notice (which shall not be more than
thirty (30) days thereafter) and the Annual Charges (taking into account any
abatement as aforesaid) shall be prorated to the termination date and DeltaCom
shall thereupon promptly vacate the Leased Space.
19. Indemnification.
---------------
a. Each party (the "Indemnifying Party") agrees to compensate the
other for damages and to indemnify and hold the other harmless from all claims
(including attorneys' fees, costs and expenses of defending against such
claims) arising from the acts or omissions of the Indemnifying Party or its
agents, employees, engineers, contractors, subcontractors, licensees, or
invitees in or about the Leased Space and/or the POP or arising from the
Indemnifying Party's default pursuant to this Agreement. Each party specifically
agrees to compensate the
9
<PAGE>
other for damages and to indemnify and hold the other harmless from all claims
(including attorneys' fees, costs and expenses of defending against such claims)
imposed by regulatory agencies, including the Federal Communications Commission
(the "FCC"), as a result of the acts or omissions of the Indemnifying Party.
Except as otherwise specifically provided herein to the contrary, it is
understood and agreed that all property kept, installed, stored, or maintained
in or upon the Leased Space and/or the POP by DeltaCom shall be so installed,
kept, stored, or maintained at the risk of DeltaCom. SCI shall not be
responsible for any loss or damage to equipment owned by DeltaCom which might
result from tornados, lightning, wind storms, or other Acts of God. The
indemnities described in this Section shall survive termination of this
Agreement.
b. The parties understand that SCI would not enter into this
Agreement except that it be clearly understood that the parties agree that this
Agreement does not give rise, and is not intended to give rise, to any third-
party claims, as there are no intended third-party beneficiaries to this
Agreement. Based on the foregoing, the parties intend that SCI shall not be
liable; (i) to any third party due to any provision of this Agreement, or (ii)
notwithstanding the provisions of Section 19.a, to DeltaCom on account of any
interruption of the business of DeltaCom, unless such interruption is caused by
the gross negligence or intentional misconduct of SCI or SCI's agents,
employees, engineers, contractors, subcontractors, licensees, or invitees in or
about the Leased Space and/or the POP. In the event of any interruption of the
business of DeltaCom which interruption is not caused by the gross negligence or
intentional misconduct of SCI or SCI's agents, employees, engineers,
contractors, subcontractors, licensees, or invitees in or about the Leased Space
or the POP, DeltaCom shall be entitled to terminate this
10
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Agreement , receive a prorated refund of any advance rental, and/or abate rent
until the interruption ceases, as its sole remedies against SCI for said
interruption of its business. The provisions of this Section 19.b shall survive
termination of this Agreement.
c. THE PARTIES UNDERSTAND THAT SCI WOULD NOT ENTER INTO THIS
AGREEMENT EXCEPT THAT IT IS CLEARLY UNDERSTOOD THAT SCI SHALL NOT BE LIABLE TO
DELTACOM OR ANY OTHER PERSON OR ENTITY FOR ANY CONSEQUENTIAL DAMAGES ARISING
FROM ANY CAUSE WHATSOEVER. In the event that any third party seeks to hold SCI
responsible for any consequential damages, then in that event, DeltaCom agrees
to indemnify and hold harmless SCI from all damages and costs, including
attorney's fees, associated with such claim.
20. Insolvency. (a) The appointment of a receiver or trustee to take
----------
possession of all or a substantial portion of the assets of DeltaCom, or (b) an
assignment by DeltaCom for the benefit of creditors, or (c) the institution by
or against DeltaCom of any proceedings for bankruptcy or reorganization under
any state or federal law (unless, in the case of involuntary proceedings, the
same shall be dismissed within sixty (60) days after institution), or (d) any
execution issued against a significant portion of the assets of DeltaCom or
against DeltaCom's interest hereunder which has not stayed or discharged at
least twenty (20) days prior to a scheduled execution sale, shall constitute a
breach of this Agreement by DeltaCom. In the event of such a breach, SCI shall
have, without need of further notice to DeltaCom, the rights enumerated in
Section 21 herein.
11
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[Page Intentionally Blank]
12
<PAGE>
21. Default.
-------
a. Events of Default. If DeltaCom shall fail to pay Annual Charges as
-----------------
set forth above or any other sum payable to SCI hereunder or shall fail to
perform or observe any of the other covenants, terms or conditions contained in
this Agreement within thirty (30) days (or such longer period as is reasonably
required to correct any such default, but not more than ninety (90) days,
provided DeltaCom promptly commences and diligently continues to effectuate a
cure) after written notice thereof by SCI, or if any of the events specified in
Paragraph 20 hereof occur, or if DeltaCom vacates or abandons the Leased Space
in contradiction of this Agreement during the term hereof or removes or
manifests an intention to remove any substantial portion of DeltaCom's goods or
property therefrom other than in the ordinary and usual course of DeltaCom's
business, then, and in any of said cases (notwithstanding any former breach of
covenant or waiver thereof in a former instance), SCI, in addition to all other
rights and remedies available to it by law or equity or by any other provisions
hereof, may at any time thereafter, terminate this Agreement on at least five
(5) days' notice to DeltaCom and, on the date specified in said notice, this
Agreement and the term hereby demised and all rights, but not obligations of
DeltaCom hereunder shall expire and terminate and DeltaCom shall thereupon quit
and surrender possession of the Leased Space to SCI in the condition elsewhere
herein required and DeltaCom shall remain liable to SCI as hereinafter provided.
DeltaCom shall not be in default of this Agreement if any past due payment is
made within 15 days of notice thereof.
b. Overdue Payments. If Annual Charges or any other sum due from
----------------
DeltaCom to SCI shall be overdue for more than fifteen (15) days after notice
from SCI, it shall
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thereafter bear interest at the rate of eighteen (18%) percent per annum (or, if
lower, the highest legal rate) until paid.
22. Subordination.
-------------
a. General. This Agreement and all rights of DeltaCom hereunder are
-------
and shall be subject to and subordinate to the Master Lease and the Real
Property Lease, as well as any and all mortgages which may now or hereafter be
secured upon the Palmetto Center and/or the POP and to all renewals, amendments,
modifications, consolidations, replacements and extensions of the said lease
and/or any such mortgage. This clause shall be self-operative and no further
instrument of subordination shall be required by any third party, but in
confirmation of such subordination, DeltaCom shall execute, within fifteen (15)
days after request, any certificate that SCI may reasonably require
acknowledging such subordination. Notwithstanding the foregoing, the party
holding the instrument to which this Agreement is subordinate shall have the
right to recognize and preserve this Agreement and the rights granted herein in
the event of any foreclosure sale or possessory action, and in such case, this
Agreement shall continue in full force and effect at the option of the party
holding the superior lien or interest and DeltaCom shall attorn to such party
and shall execute, acknowledge and deliver any instrument that has for its
purpose and effect the confirmation of such attornment. If SCI shall so request,
DeltaCom shall send to any mortgagee or other party designated by SCI, a copy of
any notice given by DeltaCom to SCI alleging a material breach by SCI in its
obligations under this Agreement.
14
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23. Disclaimer of Warranties. SCI has provided no warranties of any type
------------------------
to DeltaCom regarding the Leased Space, the POP, the Network, or any structure
or improvement thereon, or the ability or suitability of them to accommodate
DeltaCom's needs and objectives. DeltaCom has been provided with the opportunity
to inspect the Leased Space, the POP and the Network and to assess the condition
of each. SCI HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
24. Notices. All bills, statements, notices or other communications given
-------
hereunder shall be deemed sufficiently given or rendered only if in writing and
sent by registered mail or certified mail, postage prepaid as follows:
If to DeltaCom: DeltaCom DeltaCom
206 W. 9th Street
West Point, GA 31833
(to be provided by DeltaCom) Attn: Doug Shumate, CFO
Mel Patterson, Engrg
If to SCI: SCANA Communications, Inc.
440 Knox Abbott Drive
Suite 240
Cayce, SC 29033
or to such other person or place as a party may designate by notice as
aforesaid.
25. Prior Agreements; Amendments. This Agreement constitutes the entire
----------------------------
agreement between the parties relating to the subject matter contained herein.
Any previous agreement(s) between the parties pertaining to the same subject
matter including that Lease between SCI and South Carolina Net dated June 29,
1994 (a copy of which is attached hereto as Exhibit E and is incorporated herein
by reference) is hereby terminated. Neither party hereto
15
<PAGE>
has made any representations or promises except as contained herein and the
parties agree that this Agreement constitutes the full and exclusive agreement
of the parties with regard to the subject matter contained herein.
26. Captions. The captions of the paragraphs in this Agreement are
--------
inserted and included solely for convenience and shall not be considered or
given any effect in construing the provisions hereof.
27. Mechanic's Lien. DeltaCom shall, within twenty (20) days after notice
---------------
from SCI, discharge or bond against any mechanic's lien for material or labor
claimed to have been furnished to the Leased Space or the POP on DeltaCom's
behalf (except for work contracted for by SCI) and shall indemnify, defend and
hold harmless SCI from any loss incurred in connection therewith.
28. SCI's Right to Cure. SCI may (but shall not be obligated), on fifteen
-------------------
(15) days' notice to DeltaCom (except that no notice need to be given in case of
emergency) cure on behalf of, and without liability to, DeltaCom any default
hereunder by DeltaCom not cured by DeltaCom during said fifteen (15) days or
said cure substantially commenced under the circumstances, and the reasonable
cost of such cure (including any attorney's fees incurred) shall be deemed
immediately due to SCI and payable upon demand.
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<PAGE>
29. Quiet Enjoyment. DeltaCom, upon payment of the fees and performance
---------------
of all obligations imposed under this Agreement, shall have the peaceful and
quiet enjoyment of the Leased Space for the purposes described above without
hindrance or disturbance by SCI or those claiming by, through or under SCI,
subject, however, to the terms of the Agreement, and to any mortgage or lease
which is superior to this Agreement.
30. Taxes. DeltaCom shall be responsible for making any necessary returns
-----
for and paying any and all taxes separately levied or assessed against its
improvements to the Leased Space. DeltaCom shall reimburse SCI for any increase
in real estate taxes levied against the Leased Space which are directly
attributable to the improvements constructed by DeltaCom and are not separately
levied or assessed against DeltaCom's improvements by the taxing authorities.
31. Condemnation. If the whole of the Leased Space, or such portions
------------
thereof as will make the Leased Space unusable for the purposes herein
described, are condemned by any legally constituted public authority, then this
Agreement and the terms hereby granted, shall cease from the time when
possession thereof is taken by the public authority, and Annual Charges shall be
accounted for as between DeltaCom and SCI as of that date. Any lesser
condemnation shall in no way affect the respective rights and obligations of the
parties hereunder. However, nothing in this paragraph shall be construed to
limit or adversely effect DeltaCom's right to an award of compensation from any
condemnation proceeding.
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32. Miscellaneous.
-------------
a. Nonwaiver. The failure of either party to insist in any one or
---------
more instances upon the strict performance of any one or more of the agreements,
terms, covenants, conditions, or obligations of this Agreement, or to exercise
any right, remedy or election herein contained, shall not be construed as a
waiver or relinquishment in the future of such performance or exercise, but the
same shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission.
b. Partial Invalidity. If any of the provisions of this Agreement,
------------------
or the application thereof to any person or circumstances, shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, or the application
of such provision or provisions to persons or circumstances other than those as
to whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
C. Construction. This Agreement shall be governed in all respects by
------------
the laws of the State of South Carolina.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives the day and year first above
written.
WITNESSES: DELTACOM, INC.
/s/ Jackie Rogers By: /s/ Doug Shumate
- ------------------------- -------------------------
[SIGNATURE ILLEGIBLE] Its: Snr. VP/CFO
- ------------------------- -------------------------
SCANA COMMUNICATIONS, INC:
/s/ Peggy B. Warner By: [SIGNATURE ILLEGIBLE]
- ------------------------- -------------------------
/s/ Sarah A. Davis Its: Attorney in Fact
- ------------------------- -------------------------
19
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Exhibit 10.42
STATE OF ALABAMA )
COUNTY OF MARSHALL )
LEASE AGREEMENT
THIS AGREEMENT OF LEASE MADE THIS 1st day of January, 1996, (hereinafter
this "Agreement") by and between BRINDLEE MOUNTAIN TELEPHONE COMPANY with
offices located at 113 South Main Street, Arab, Alabama (hereinafter "BMTC") and
DELTACOM, INC., with offices located at 113 1/2 South Main Street, Arab, Alabama
(hereinafter "DeltaCom").
WITNESSETH:
1. PREMISES:
---------
In consideration of the rents, covenants and agreements hereinafter
made, reserved and contained on the part of DeltaCom to be observed and
performed, BMTC leases to DeltaCom and DeltaCom rents from BMTC the following
described premises located in Arab, Alabama (hereinafter the "Demised
Premises"):
(a) That certain real property leased by the Masonic Lodge of Arab,
Alabama, as lessor, to BMTC, as lessee, as described in that certain agreement
entitled "LEASE" (hereinafter "LEASE") dated June 1, 1985, as recorded in the
Office of the Judge of Probate for Marshall County, Alabama, in Book 780, Page
490, subject to that certain consent to sublease said certain real property to
DeltaCom from BMTC was given by the Masonic Lodge of Arab, Alabama, by Richard
York, Gordon Young, and James Hensley, as Trustees, on January 12, 1996;
(b) That certain office and storage space, upstairs and downstairs,
located at 110, 116 and 120 South Main Street in Arab, Alabama;
(c) Approximately 2,573 square feet of office and floor space
located at 113 South Main Street in Arab, Alabama;
(d) Reasonably sufficient ground space and tower attachment space
required for the safe and efficient operation of DeltaCom's microwave system
located at 113 South Main Street in Arab, Alabama; and
(e) Reasonably sufficient pole attachments and innerduct space
within BMTC's service territory for the safe and efficient operation of
DeltaCom's fiber optic system.
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2. TERM:
-----
The term of this Agreement, and DeltaCom's obligation to pay rent, shall
commence on the 1st day of January, 1996. In the event the term hereof
commences on a day other than the first day of the month, DeltaCom shall pay
rent for the fractional month on a per diem basis until the first day of the
following month and thereafter the minimum rent shall be paid in equal
installments on the first day of each month in advance.
3. LENGTH OF TERM:
---------------
3.1 The initial Term of this Agreement (sometimes referred to
hereinafter as the "Term") shall be from the commencement of the Term as
provided in the clause entitled "Term" hereof through April 30, 2005.
3.2 DeltaCom shall have an option for an additional term of ten (10)
years provided (a) BMTC and the Masonic Lodge of Arab, Alabama, are able to
negotiate the monthly rental applicable during said additional term and (b)
DeltaCom and BMTC are able to negotiate the monthly rental applicable during
said additional term. DeltaCom shall provide BMTC with written notice of its
election to enter into an option term no less than ninety (90) days prior to the
end of the initial term.
3.3 Either party hereto shall have the right to terminate this
Agreement during the initial Term, or any extensions or renewals thereof, upon
twenty-four (24) months prior written notice to the other party; provided,
however, such termination shall not be applicable to that portion of the Demised
Premises occupied by DeltaCom's telecommunications switching system,
appurtenances thereto, and associated facilities required for the proper and
efficient operation thereof.
4. RENTAL AMOUNT:
--------------
4.1 During the Initial Term of this Agreement and any additional
term(s), unless this Agreement is terminated as otherwise provided herein,
DeltaCom agrees to pay BMTC an amount equal to $164,864.00 annually to be paid
in twelve equal installments of $13,738.67 monthly. Any rent payment not
received by BMTC by the tenth (10th) day of each month the same is due shall be
considered delinquent. All delinquent amounts hereunder shall accrue a late
charge of one and one- half percent (1.5%) monthly until the same is paid in
full.
4.2 Said rental shall be paid to BMTC or its agent or designee at the
address designated in writing by BMTC or its agent.
2
<PAGE>
5. SUBLEASE:
---------
DeltaCom acknowledges that that certain real property described in
paragraph 1(a) above is subleased to DeltaCom subject to that certain consent to
sublease given by the Masonic Lodge of Arab, Alabama, dated January 12, 1996, a
copy of which is attached to this Agreement as Attachment 01. With respect to
that certain real property described in paragraph 1(a) above, DeltaCom hereby
agrees to comply with all terms, covenants and conditions of the LEASE and that,
in the event the provisions of this Agreement conflict with the terms of the
LEASE, all matters, covenants and things contained in the LEASE shall prevail
over all matters, covenants and things set forth in this Agreement as the same
relate to the sublease of said certain real property.
6. USE OF DEMISED PREMISES:
------------------------
The Demised Premises shall be used and occupied by DeltaCom for the
purpose of providing telecommunications services, information services, and
related services, and handling such items and providing such services as are
customarily handled and provided by such businesses, but for no other purpose
without the prior written consent of BMTC. DeltaCom agrees that it will use and
occupy the said Demised Premises and appurtenances in a careful, safe, and
proper manner; and will, at its expense, comply with the direction of the public
office as to the use and maintenance thereof; and will not allow said Demised
Premises to be used for any purpose or in any way that will increase the rate of
insurance upon the Demised Premises and the premises contiguous thereto, nor for
any purpose other than hereinbefore specified, and will not bring nor suffer to
be brought in or upon said Demised Premises any substance that will increase the
hazard of fire casualty in or on said Demised Premises and on the premises
contiguous thereto; and will not permit said Demised Premises to be used for any
unlawful purpose nor in any way to injure the reputation of the same or of the
building or buildings of which it is a part, or create a nuisance or bring about
trespass thereon; and will not permit said Demised Premises to remain vacant or
unoccupied for more than thirty (30) consecutive days.
7. CONTINUED POSSESSION OF DEMISED PREMISES:
-----------------------------------------
If DeltaCom continues to occupy the Demised Premises after the last day
of the Term hereof, (if the Term hereof or any extension thereof are not
extended), and BMTC accepts or agrees to accept rent thereafter, tenancy from
month to month terminable by either party on not less than ninety (90) days
notice, would then be created which monthly tenancy shall be upon the same terms
and conditions as those herein contained.
3
<PAGE>
8. INSURANCE:
----------
8.1 During the Term of this Agreement, and any renewals or extensions
thereof, unless otherwise agreed to in writing by the authorized
representatives, DeltaCom shall, at its own expense, maintain in effect
insurance coverage with limits not less than those set forth herein:
(a) Employer's liability Insurance, for employee bodily injuries and
deaths, with limits of $500,000 per occurrence; and
(b) Commercial general liability insurance, covering claims for bodily
injury, death and property damage, including comprehensive form, premises and
operations, independent contractors, products and completed operations, personal
injury, contractual, and broad form property damage liability coverage, with
limits of $1,000,000 per occurrence and general aggregate of $5,000,000.
8.2 All such policies of insurance shall provide that the same shall
not be cancelled nor the coverage modified, nor the limits changed, without
first giving thirty (30) days prior written notice thereof to BMTC. No such
cancellation, modification or change shall affect DeltaCom's obligation to
maintain the insurance coverage required by this Agreement. All liability
insurance policies shall be written on an "occurrence" policy form. DeltaCom
shall be responsible for payment of any and all deductibles from insured claims
under its policies. Upon reasonable request, DeltaCom shall furnish to BMTC a
certificate of insurance as evidence of compliance with the aforementioned
requirements.
8.3 The foregoing insurance requirements are not intended to and shall
not in any manner limit or qualify the liabilities and obligations assumed by
DeltaCom under this Agreement.
9. USE OF COMMUNITY AREA AND SIGNS:
--------------------------------
9.1 DeltaCom agrees to abide by all reasonable rules and regulations
which may be promulgated by BMTC in connection with loading, unloading, parking
or other controls of the use of the Demised Premises by DeltaCom, its agents,
employees and customers.
9.2 DeltaCom shall not erect, install or maintain any sign on the
exterior of the Demised Premises or upon any other part of the Demised Premises
without the prior written approval thereof by BMTC, and DeltaCom upon written
notice from BMTC shall promptly remove any sign, advertising, or display device
erected or maintained in violation of this provision. If DeltaCom fails to
remove same promptly upon receipt of such notice
4
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from BMTC, then in such event BMTC may cause such sign, advertising, or display
device to be removed and the cost of such removal and the restoration of the
Demised Premises resulting from the removal of the sign shall be paid by
DeltaCom as additional rental, which amount is to be included within the Rent
due for the month following such removal. The location of the sign and the
color, size and design thereof shall be subject to the approval of BMTC.
10. REPAIRS, DELTACOM MAINTENANCE, WAIVER OF LIABILITY:
--------------------------------------------------
10.1 DeltaCom shall, at its own expense, keep and maintain the Demised
Premises and appurtenances thereof, including sprinkler, if any, heating, air
conditioning, water and sewer systems, electrical, machinery, fixtures,
plumbing, plumbing fixtures and equipment, in good order and repair throughout
the Term of this Agreement and any extensions thereof, except such portions of
the Demised Premises which are to be repaired by BMTC pursuant to the specific
and applicable terms contained in this Agreement. DeltaCom shall be liable for
any damage or injury which may be caused by or resulting from DeltaCom's failure
to faithfully comply with all of the terms and conditions contained herein and
which are to be complied with by DeltaCom.
10.2 In the event DeltaCom desires to penetrate the roof or any wall of
said Demised Premises for any type of ventilation, DeltaCom shall be solely
responsible for any damage which may be caused by or result from such
penetration. Such penetration shall not be constructed except with the written
consent and approval of BMTC first obtained and it shall be constructed at the
sole cost of DeltaCom.
10.3 DeltaCom covenants and agrees to indemnify and save harmless, at
its own cost, BMTC from and against any and all liability, damage, injury,
actions or causes of action whatsoever resulting from the operation, conduct and
use of the interior of the Demised Premises.
11. REPAIRS BY BMTC:
---------------
Subject to the provision in this Agreement (wherein BMTC agrees to
repair or reconstruct the Demised Premises in event of casualty or in the event
of the taking of the Demised Premises by Eminent Domain, all as set forth in the
provisions relating thereto), BMTC agrees to keep in good repair, or caused to
be kept in good repair, the foundations exterior walls (excluding the exterior
and interior of all windows and doors), downspouts, gutters and roof of the
Demised Premises, except, however, for any damage or injury thereto caused by or
resulting from any negligence, act, or omission of DeltaCom or any of DeltaCom's
agents, servants, employees, sub-lessees, licensees, invitees, and customers. It
is expressly agreed by the parties hereto, and it is a condition precedent to
all of the
5
<PAGE>
obligations of BMTC to repair and maintain the exterior of the Demised Premises,
as aforesaid, that DeltaCom shall have notified BMTC, in writing, of the need of
such repairs. If BMTC shall fail to commence making of such repairs within
fifteen (15) days after written notice thereof is received by BMTC, then, in
such event, DeltaCom's sole right and remedy for such failure on the part of
BMTC shall be, after notifying BMTC, to cause such repairs to be made and to
deduct the cost thereof from the rent payable thereafter, but the amount of such
deduction shall not exceed the reasonable value of such repairs.
12. ADDITIONS AND ALTERATIONS:
-------------------------
DeltaCom agrees not to make any additions, alterations or improvements
in and to the Demised Premises without the prior written consent of BMTC, which
consent shall not be unreasonably withheld, but in no event shall such
additions, alterations or improvements in any way, in the judgment of BMTC,
impair the structural strength or soundness of the building of which the Demised
Premises are a part, except as may be specifically allowed by the terms of this
Agreement.
13. POLE AND TOWER ATTACHMENTS:
--------------------------
13.1 DeltaCom shall have the right to attach, maintain, repair,
replace, and remove fiber optic cable and associated equipment on BMTC's poles
in BMTC's customer territory and attach, maintain, repair, replace, and remove
microwave antennas, cabling, and other associated equipment on BMTC's tower
located at 113 South Main Street in Arab, Alabama. DeltaCom shall be solely
responsible for determining and assuring the safety of all attachments to the
poles and tower and the structural integrity of the tower prior to the
attachment of any new antennas or equipment thereto. No additional attachments
not in existence as of the date of this Agreement shall be attached to BMTC's
poles or tower without the written consent of BMTC, which consent shall not be
unreasonably withheld, and (a) so long as the attachment(s) will not have an
adverse affect upon BMTC's or its other current lessees' use of the poles and
tower and (b) DeltaCom provides assurance to BMTC that the proposed
attachment(s) will not be adverse to the structural integrity of the poles and
tower.
13.2 DeltaCom covenants and agrees to indemnify and save harmless, at
its own cost, BMTC from and against any and all liability, damage, injury,
actions or causes of action whatsoever resulting from the attachment,
maintenance, repair, replacement, removal, and use of BMTC's poles and tower.
6
<PAGE>
14. UTILITIES:
---------
Unless the following charges are metered separately or are incurred
separately by DeltaCom, BMTC agrees to pay all charges for utilities, including
heating, water, gas, electricity and sewerage, and also for trash and garbage
removal, as and when said charges become due and payable. DeltaCom shall
reimburse BMTC upon receipt of invoice for that portion of the said charges
equal to the proportionate share of the Demised Premises located at 113 and 113
1/2 South Main Street to the total BMTC space located at 113 and 113 1/2 South
Main Street.
15. BANKRUPTCY OR INSOLVENCY:
------------------------
If at any time during the term of this Agreement or any extensions
thereof, a petition has been filed to have DeltaCom adjudicated a bankrupt, or a
petition for reorganization or arrangement under any of the laws of the United
States Bankruptcy Act be filed by DeltaCom or be filed against DeltaCom and not
be dismissed within sixty (60) days from the date of such filing, or if DeltaCom
has filed a petition to be adjudicated a bankrupt, or if the assets of DeltaCom
or the business conducted by DeltaCom on the Demised Premises be taken over or
sequestered by a trustee or any other person pursuant to any judicial
proceedings, or if DeltaCom makes an assignment for the benefit of creditors,
then the occurrence of any such act shall be deemed, at the option of BMTC, to
constitute a breach of this Agreement by DeltaCom. BMTC, at its election, may
terminate this Agreement in the event of occurrence of any of the events
enumerated herein, by giving not less than five (5) days written notice to
DeltaCom or to the assignee or to the trustee or such other person appointed
pursuant to the order of a court, and thereupon BMTC may re-enter the Demised
Premises and this Agreement shall not be treated as an asset of DeltaCom's
estate. However, BMTC shall be entitled to exercise all available rights and
remedies and to recover from DeltaCom all moneys which may be due or become due,
including damages resulting from the breach of the terms of this Agreement by
DeltaCom.
16. TAXES:
-----
16.1 BMTC shall pay all real estate taxes assessed against the realty
constituting the Demised Premises, of which the Demised Premises is a part, as
same become due and payable. DeltaCom shall pay all taxes and assessments
assessed against or by reason of the property which DeltaCom owns or uses within
the Demised Premises, and all licenses and other fees in connection with and in
the conduct of DeltaCom business.
7
<PAGE>
16.2 DeltaCom shall pay to BMTC as additional rental the fractional
portion of the Tax Increase, if any, in any Tax Fiscal Year subsequent to the
Base Tax Year, as hereinafter more fully provided. For the purpose herein the
term Tax Increase shall mean the amount, if any, by which the taxes and
assessments levied and assessed in any Tax Fiscal Year, during the term of this
Agreement and any extensions thereof, applicable to all of the land and
improvements comprising the Demised Premises, exceed the amount of taxes and
assessments levied and applicable to and upon the land and buildings comprising
the Demised Premises for such Base Tax Year. The term Base Tax Year shall mean
the first tax fiscal or calendar year for or during which year the Demised
Premises are occupied by DeltaCom. DeltaCom's portion of the Tax Increase shall
be in the percentage which the floor space area of the Demised Premises bears to
the total floor space area of the buildings in which the Demised Premises are
located.
16.3 In addition thereto, if the taxes and assessments upon the Demised
Premises in and/or after the year during which additions or improvements are
made by DeltaCom or by BMTC, are increased by reason of any such additions or
improvements, then DeltaCom shall pay BMTC the amount representing such increase
for each year. In the event less than a full lease year is involved in computing
such increase or in the event the Base Tax Year and lease year are not
identical, then the amount of such tax increase shall be prorated on a monthly
basis between the parties hereto, to the end that DeltaCom shall pay the tax
increase only attributable to the applicable portion of the Base Tax Year. In
each event the aforesaid amounts shall be paid to BMTC semi-annually or
periodically by DeltaCom within fifteen (15) days after submission by BMTC or
his agent to DeltaCom of the bills and the substantiating data therefore.
17. INSPECTION AND ACCESS TO PREMISES:
---------------------------------
17.1 BMTC, its agents and employees, shall have the right, at all
reasonable times, to enter the Demised Premises or any part thereof to inspect
and examine same and for the purpose of making any repairs to or within the
Demised Premises which BMTC has agreed to make under the terms of this
Agreement, and/or which BMTC deems advisable to make in order to preserve and/or
maintain the Demised Premises.
17.2 BMTC, its agents and employees shall have free access to and
within the Demised Premises at all reasonable times of the day for the purpose
of examining the same and also to make any repairs or alterations to or within
said Demised Premises that BMTC may deem necessary for the safety or
preservation of the property.
8
<PAGE>
18. PARKING:
--------
DeltaCom shall have the non-exclusive right, in common with other
occupants of the buildings in which the Demised Premises are located, of parking
in the spaces as may be designated by BMTC from time to time in the future, and
BMTC agrees to keep the parking area clean and in good repair with reasonably
sufficient space for parking.
19. ASSIGNMENT AND SUBLETTING:
--------------------------
19.1 DeltaCom shall not, without the prior written consent of BMTC
first obtained, which consent shall not be unreasonably withheld, assign this
Agreement, or sublet the Demised Premises or any part thereof, or permit the use
of the Demised Premises by any party other than DeltaCom. However, DeltaCom may
sublet portions of the Demised Premises provided such subleasee's operation is
related to the general operation of DeltaCom and under the supervision and
control of DeltaCom, and provided further that such operation is within the
purposes for which said Demised Premises are let. Consent given by BMTC to any
assignment or sublease a except as provided herein, shall be made only subject
to the obtaining of prior written consent of BMTC. The assignee of DeltaCom, at
the option of BMTC, shall become directly liable to BMTC for all obligations of
DeltaCom hereunder, but no sublease or assignment by DeltaCom shall relieve
DeltaCom of any primary liability hereunder nor of its obligations to comply
promptly and faithfully with all of the terms and conditions of this Agreement.
19.2 However, in any event, it is agreed that DeltaCom shall have the
right to sublease or assign this Agreement to any wholly owned corporation or to
any corporation by which it is wholly owned, its subsidiaries, affiliated, and
successors or its successors or assigns resulting from a merger or
consolidation.
20. FIXTURES:
---------
Upon the expiration of the Term of this Agreement, or any extension
thereof, DeltaCom, if not in default in the terms of this Agreement, shall have
the right to remove, at its cost, all trade fixtures and trade equipment which
it has placed on the Demised Premises without loss in rental to BMTC.
21. CANCELLATION OF LEASE BY BMTC:
------------------------------
In the event DeltaCom shall default in the payment of rent herein
reserved, when due, or if DeltaCom shall default in performing any of the other
terms or provisions of this Agreement which are to be performed by DeltaCom,
and fails to cure such default within
9
<PAGE>
thirty (30) days after the date of written notice from BMTC of such default,
then, in each such event, BMTC, at its option, may terminate this Agreement by
written notice to DeltaCom, whereupon this Agreement shall end and terminate.
After an authorized assignment of this Agreement or subletting of part or all of
the entire Demised Premises as authorized by the terms of this Agreement, the
occurring of any of the foregoing defaults or events shall affect this Agreement
whether caused by DeltaCom or the assignee or subleasee. Upon termination by
BMTC of the tenancy, DeltaCom shall surrender at once possession of the Demised
Premises to BMTC and remove all of DeltaCom's effects therefrom; and BMTC shall
have the right forthwith to re-enter the Demised Premises, repossess the same,
and remove all persons and effects therefrom, using such force as may be
necessary without being guilty of trespass, forcible entry or detainer or other
tort.
22. SUBLETTING BY BMTC OF DEMISED PREMISES:
--------------------------------------
Without terminating this Agreement upon breach thereof by DeltaCom or
its sub-lessees or assignees, or upon DeltaCom's vacation or abandonment of the
Demised Premises or upon ceasing to operate a business therein, BMTC, at its
option, may enter upon and let the Demised Premises to others at the best price
obtainable by reasonable effort, without advertisement and/or by private
negotiation, for any term BMTC deems proper. DeltaCom shall be and remain liable
to BMTC for the difference, if any, between DeltaCom's rent due and to become
due hereunder and the amount of rent actually received by BMTC as a result of
re-letting of the Demised Premises for the balance of the period covered by this
Agreement.
23. EFFECT OF TERMINATION OF LEASE:
------------------------------
No termination of this Agreement prior to the end of the Term hereof
shall affect BMTC's right to collect full rent for the term of this Agreement,
except in the events specifically provided in this Agreement. Notwithstanding
anything to the contrary herein, it is specifically understood that if DeltaCom
shall default in performing any of the terms or provisions of this Agreement, or
the Agreement shall be terminated by BMTC prior to the end of the term hereof as
a result of Tenants default or breach, BMTC shall have the right to accelerate,
without notice to DeltaCom, the entire rent for the term of this Agreement.
24. DAMAGE TO PREMISES:
------------------
If the Demised Premises shall be damaged by fire, the elements,
unavoidable accident or other casualty, but are not thereby rendered
unwarrantable in whole or in part, BMTC shall at its own expense cause such
damage to be repaired, and the rent shall not be abated except as hereinafter
provided. If by any reason of such occurrence, the Demised Premises shall be
rendered untenantable only in part, BMTC shall, at its own
10
<PAGE>
expense, cause the damage to be repaired with due diligence, and the fixed
minimum rent meanwhile shall be abated proportionately as to that portion of the
Demised Premises rendered wholly untenantable. If the Demised Premises shall be
rendered wholly untenantable by reason of such occurrence, BMTC shall, at its
own expense, cause such damage to be repaired with due diligence, and the fixed
minimum rent meanwhile shall abate until the Demised Premises shall have been
restored and rendered tenantable. If, during the last two (2) years of the term
of this Agreement, or any extension thereof, the Demised Premises are destroyed
by fire or other casualty or are partially destroyed by fire or other casualty,
or are partially destroyed so as to render the Demised Premises wholly unfit for
occupancy, then at such time, if DeltaCom exercises its option, if such option
exists in accordance with the terms of this Agreement, to extend the term of the
Agreement for an option term, then in that event BMTC shall have no option to
terminate this Agreement, but shall be obligated to restore the Demised Premises
with due diligence in the same manner as hereinabove set forth in this
Agreement. However, if DeltaCom does not exercise its option to extend the term
of this Agreement, then in such event either DeltaCom or BMTC, within sixty (60)
days from such destruction by fire or other casualty shall have the right to
terminate this Agreement by written notice to the other. If the Demised Premises
are reconstructed, then the payment of rent by DeltaCom shall abate from the
time of the fire or other destruction until the Demised Premises are again ready
for occupancy and use, whereupon this Agreement shall continue for the unexpired
term, extended by the period during which the Demised Premises are not fit for
occupancy and use, at and for the same rentals and upon the same terms and
conditions as herein provided. If the Demised Premises are not reconstructed and
restored due to the proper election of either DeltaCom or BMTC, then this rental
contract shall cease and terminate from the time of the fire or destruction or
other casualty, and DeltaCom shall be released and discharged from the payment
of all rent accruing after the date of such destruction by fire or other
casualty, and BMTC may re-enter and repossess the Demised Premises.
25. EMINENT DOMAIN:
--------------
If the whole of the Demised Premises, or such portion thereof as will
make Demised Premises unusable for the purposes for which the Demised Premises
are leased, shall be appropriated or taken pursuant to the power of Eminent
Domain by any public or quasi public authority, then the Term herewith granted
shall cease and terminate from any further liability hereunder, and rent shall
be computed between BMTC and DeltaCom as of the date of taking and be paid to
that day. Such termination, however, shall be without prejudice to the rights of
either BMTC or DeltaCom to recover from the condemner compensation and damage
caused by condemnation and neither party shall have any rights in any award or
settlement so received by the other from the condemning body. If only part of
the Demised Premises shall have been taken under this power of Eminent Domain
and the Demised Premises so taken may be replaced or restored within a period
11
<PAGE>
of 120 days from date of taking thereof and thereby make said Demised Premises,
as rebuilt or restored, useable for DeltaCom's purposes as herein described,
then in each such event BMTC shall notify DeltaCom within 15 days from the date
of such taking, of BMTC's election to repair or restore such taken area and this
Agreement shall continue in full force and effect, except that during the period
of rebuilding or restoration if DeltaCom can operate its business during such
period, DeltaCom's rent shall be reduced in the same proportion that the amount
of the floor area of the Demised Premises taken bears to the total area of the
Demised Premises immediately prior to such taking. Upon completion of said
reconstruction the rent, as provided herein, shall be paid to BMTC. Sale by BMTC
to any public or quasi public body having the power of Eminent Domain under
threat of condemnation or while condemnation proceedings are pending, shall be
deemed to be a taking by Eminent Domain.
26. SUBORDINATION TO BMTC'S MORTGAGE:
--------------------------------
This Agreement, at the option of BMTC or BMTC's Mortgagee, if any, may
be and at all times after notice thereof shall be subject and subordinate to any
and all present and future mortgages, security deeds, or encumbrances which may
be placed by BMTC on said Demised Premises or any part thereof. DeltaCom
covenants and agrees to execute upon demand of BMTC all instruments
subordinating this Agreement to the lien of any mortgage or mortgages, security
deeds, or encumbrances as shall be required by BMTC. DeltaCom hereby irrevocably
appoints BMTC as attorney in fact of DeltaCom, with power to execute and
deliver, without subjecting BMTC to liability of any kind, such instrument or
instruments for and in the name of DeltaCom, in the event DeltaCom shall fail to
execute such instrument or instruments within five (5) days after written notice
to do so is given to DeltaCom. Provided however, anything to the contrary
contained herein notwithstanding, such mortgagee or encumbrance holder shall,
unless otherwise allowed by state law, recognize the validity and continuance of
this Agreement in the event of a foreclosure of BMTC's interest or otherwise, as
long as DeltaCom shall not be in default under the terms of this Agreement.
27. DELTACOM'S EVIDENCE OF TERM AND RENT:
------------------------------------
Upon BMTC's request, DeltaCom shall execute, acknowledge and deliver to
BMTC, within ten (10) days from date of said request, a statement in writing
certifying that this Agreement is in full force and effect and containing the
dates to which the rent and any other charges have been paid. The statement so
delivered to BMTC may be relied upon by any prospective purchaser of or by any
mortgagee upon the Demised Premises.
12
<PAGE>
28. RELEASE FROM LIABILITY IN CERTAIN EVENTS:
----------------------------------------
28.1 In the event BMTC is delayed or prevented from making any repairs,
rebuilding or restoration or furnishing any services or performing any other
covenant or duty, whether expressed herein or implied to be performed on BMTC's
part due to BMTC's inability or difficulty in obtaining labor, materials
necessary therefore or due to strike, lockout, embargo, war, Governmental orders
or acts of God or any other cause beyond BMTC's control, then BMTC shall not be
liable to DeltaCom for damages resulting therefrom, nor, except as expressly
otherwise provided in connection with casualty losses or condemnation
proceedings, nor shall DeltaCom be entitled to any abatement or reduction of
rent by reason thereof nor shall the same give rise to a claim in DeltaCom's
favor that such failure constitutes actual or constructive, partial or total,
eviction from the Demised Premises.
28.2 DeltaCom shall not be entitled to any compensation or reduction of
rent by reason of inconvenience or loss arising from the necessity of BMTC's
entering the Demised Premises for any of the purposes authorized in this
Agreement, or for repairing the Demised Premises or any portion of the building
of which the Demised Premises are a part.
29. SUCCESSORS AND ASSIGNS:
----------------------
The covenants, conditions, and stipulations contained in this Agreement
shall bind and inure to the benefit of BMTC and DeltaCom and their respective
successors and assigns except as provided in this Agreement.
30. ATTORNEY'S FEES:
---------------
All past due rent, and any other amount which BMTC has advanced in order
to cure DeltaCom's defaults hereunder, shall bear interest at the monthly rate
of one and one-half percent (1.5%) or the highest legal rate, whichever is
lower, from the date of payment until repaid. Any amounts advanced by BMTC
pursuant to the terms and provisions of this Agreement, shall be repaid to BMTC
by DeltaCom by the first of the calendar month following the date of such
advances. If any rent or such other amounts owing under this Agreement is
collected by or through an attorney-at-law, DeltaCom agrees to pay reasonable
attorneys fees in effecting collections.
31. RIGHTS CUMULATIVE: All rights, powers and privilege available
-----------------
hereunder to the parties hereto are cumulative and are in addition to the rights
granted by law.
13
<PAGE>
32. NOTICES:
-------
32.1 Any written notice under this Agreement shall be deemed properly
given if sent by (a) registered or certified mail, postage prepaid, (b) by
nationally recognized overnight delivery service, (c) by facsimile, or (d) by
hand delivery to the address specified below, unless otherwise provided for in
this Agreement:
If to DeltaCom: (One copy to each)
DELTACOM, INC.
Attention: President
and
DELTACOM, INC.
Attention: General Counsel
113 1/2 South Main Street
Arab, AL 35016
Facsimile Number: (205)586-1365
If to BMTC: (One copy to each)
BRINDLEE MOUNTAIN TELEPHONE COMPANY
Attention: President
and
BRINDLEE MOUNTAIN TELEPHONE COMPANY
Attention: General Counsel
113 South Main Street
Arab, AL 35016
Facsimile Number: (205)586-1771
32.2 Either party may, by written notice to the other party, change the
name or address of the person to receive notices pursuant to this Agreement.
32.3 Unless otherwise provided herein, notices shall be deemed
delivered: if sent by U.S. Mail, three (3) days after deposit; if sent by
facsimile, upon verification of receipt; if sent by commercial overnight
delivery service, one (1) day after deposit; or, if by hand delivery, on the
date of receipted delivery.
33. WAIVER OF RIGHTS:
----------------
No failure of BMTC to exercise from time to time any right or privilege
granted BMTC hereunder, or to insist upon strict and faithful compliance by
DeltaCom with all of
14
<PAGE>
the obligations hereunder required of DeltaCom, and no custom or practice of the
parties at variance with the terms hereof shall constitute a waiver of BMTC's
right to demand strict compliance with the terms hereof. No waiver by BMTC of
any breach of any covenant of DeltaCom herein contained shall be construed as a
waiver of any subsequent breach of the same or any other covenant herein
contained.
34. CAPTIONS:
--------
Paragraph captions throughout this instrument are inserted for
convenience and reference only, and the words contained therein shall in no way
be held to explain, modify, amplify or aid in the interpretation, construction
or meaning of the provisions of this Agreement or as a limitation of the scope
of the particular paragraph to which they refer.
35. QUIET ENJOYMENT:
---------------
So long as DeltaCom pays the rent and other charges provided in this
Agreement, and faithfully performs and observes all of the covenants and
provisions hereof upon its part to be performed, DeltaCom shall have peaceable
and quiet enjoyment and possession of the Demised Premises together with the use
of the common area facilities, without any let or hindrance from BMTC or of any
person or entities lawfully claiming through the Lessor subject to the aforesaid
rights of redemption.
36. ENTIRE AGREEMENT:
----------------
This Agreement contains and embodies the entire agreement of the parties
hereto and no representations inducements or agreements, oral or otherwise,
between the parties not contained and embodied herein shall be of any force or
effect, and that same may not be modified, changed or terminated in whole or in
part orally or in any other manner than by an agreement in writing duly signed
by all of the parties hereto.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives as of the day and
year first above written.
DELTACOM:
--------
ATTEST: DELTACOM, INC.
By: /s/Tom Mullis By: /s/Foster McDonald
-------------------------- --------------------------
Name: Tom Mullis Name: Foster McDonald
------------------------ ------------------------
Title: Secretary Title: President
----------------------- -----------------------
BMTC:
----
ATTEST: BRINDLEE MOUNTAIN TELEPHONE COMPANY
By: /s/Tom Mullis By: /s/Sidney L. McDonald
-------------------------- --------------------------
Name: Tom Mullis Name: Sidney L. McDonald
------------------------ ------------------------
Title: Secretary Title: President
----------------------- -----------------------
16
<PAGE>
STATE OF ALABAMA )
COUNTY OF MARSHALL )
CONSENT TO SUBLEASE
-------------------
WHEREAS, the Masonic Lodge of Arab, Alabama, by Ralph Fleming, Charles
McClendon, and Clyde Yarbrough, as Trustees, (hereinafter referred to as the
"Lodge") leased certain real property (hereinafter referred to as the
"Premises") to Brindlee Mountain Telephone Company (hereinafter referred to as
"BMTC") as described in that certain agreement entitled "LEASE" dated June 1,
1985, (hereinafter referred to as "Lease"), said Lease having been recorded in
the Office of the Judge of Probate for Marshall County, Alabama, in Book 780,
Page 490; and
WHEREAS, BMTC desires to sublease the Premises to DeltaCom, Inc., an
Alabama corporation, (hereinafter referred to as "DeltaCom") and BMTC having
requested the consent of the Lodge to the proposed sublease to DeltaCom; and
WHEREAS, the Lodge desires to consent to the sublease of the Premises to
DeltaCom.
NOW THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration in hand paid to the Lodge by BMTC, the
receipt and sufficiency of which is hereby acknowledged by the Lodge, the Lodge
does hereby consent to a sublease being made by BMTC to the entire Premises
described in the Lease, to DeltaCom, conditioned upon the following:
1. The sublease from BMTC to DeltaCom shall be for the remainder of
the current term of the Lease, said term to expire on April 30, 2005.
2. The sublease from BMTC to DeltaCom shall be subject to the terms,
covenants and conditions of the Lease and all matters, covenants and things
contained in the Lease, shall prevail over all matters, covenants and things set
forth in the lease agreement between BMTC and DeltaCom.
3. BMTC shall remain primarily responsible to the Lodge for the
fulfillment of all obligations and responsibilities required in the Lease for
which BMTC is currently or may hereafter become obligated or responsible. No
term, covenant or condition of the lease agreement between BMTC and DeltaCom
shall modify or attempt to modify BMTC's obligations and responsibilities to the
Lodge.
<PAGE>
IN WITNESS WHEREOF, this Consent to Sublease was given and executed on
behalf of the Lodge and acknowledged by BMTC this 12th day of January, 1996.
LODGE
-----
Witness: MASONIC LODGE OF ARAB, ALABAMA
/s/ Merle Couch By: /s/ Richard York
- ---------------------------------- --------------------------------
TRUSTEE
/s/ Garland L. Young
--------------------------------
TRUSTEE
/s/ James P. Hensley
--------------------------------
TRUSTEE
BMTC ACKNOWLEDGEMENT
--------------------
Witness: BRINDLEE MOUNTAIN TELEPHONE
COMPANY
/s/ Deborah Wright By: /s/ Tom Mullis
- ---------------------------------- --------------------------------
Its VICE PRESIDENT
--------------------------------
THIS INSTRUMENT PREPARED BY:
Rodney N. Hyatt
P.O. Box 130
Arab, AL 35016
<PAGE>
Exhibit 10.43
THE PAYMENT OF THIS NOTE IS SUBORDINATE TO THE PAYMENT OF ALL SENIOR DEBT AS
DEFINED IN THAT CERTAIN SUBORDINATION AGREEMENT, DATED AS OF MARCH 27, 1997
AMONG SCANA COMMUNICATIONS, INC., ITC HOLDING COMPANY, INC. AND FIRST UNION BANK
OF NORTH CAROLINA, AS ADMINISTRATIVE AGENT FOR THE BENEFIT OF ITSELF, COBANK,
ACB, AS DOCUMENTATION AGENT, AND THE LENDERS IDENTIFIED THEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, OR HYPOTHECATED WITHOUT THE PRIOR WRITTEN CONSENT OF THE
MAKER.
PROMISSORY NOTE
---------------
$9,964,091.00 March 27, 1997
FOR VALUE RECEIVED, ITC Holding Company, Inc., a Delaware corporation
("ITC" or the "Maker"), promises to pay to the order of SCANA Communications,
Inc., a South Carolina corporation, or permitted assigns ("SCANA" or the
"Holder"), at 1426 Main Street, Columbia, South Carolina 29201, or at such other
place as the Holder of this Note may from time to time designate, the principal
amount of NINE MILLION, NINE HUNDRED SIXTY-FOUR THOUSAND, NINETY-ONE DOLLARS
($9,964,091.00), together with interest on the unpaid principal amount hereof
(computed on the basis of a 360-day year and applied to the actual number of
days elapsed in each interest calculation period) at the rate of eleven percent
(11%) per annum. Payments of principal shall be made semiannually commencing
September 30, 1997, in equal semiannual installments of Nine Hundred Ninety-six
Thousand, Four Hundred Nine Dollars and Ten Cents ($996,409.10), together with
interest accrued thereon (payable in arrears), with a final installment thereof
being due on March 31, 2002, when the full remaining balance of principal,
together with interest accrued thereon, shall be payable.
Interest and principal shall be payable in lawful money of the United
States of America. Any payment on this Note coming due on a Saturday, a Sunday,
or a day that is a legal holiday in the place at which a payment is to be made
hereunder shall be made on the next succeeding day that is a business day in
such place, and any such extension of the time of payment shall be included in
the computation of interest hereunder.
<PAGE>
The unpaid principal amount of this Note may be prepaid in whole or in
part at any time or times without premium or penalty. Each prepayment shall be
applied first to the payment of all interest and other amounts accrued hereunder
on the date of any such prepayment, and the balance of any such prepayment shall
be applied to installments of principal payable hereunder in the inverse order
of maturity. No prepayment shall entitle any person to be subrogated to the
rights of the Holder unless and until this Note has been paid in full.
This Note evidences partial payment of the purchase price payable
under a Sale and Purchase Agreement dated as of March 11, 1997 among SCANA
Corporation ("SCANA Corporation"), SCANA Communications, Inc., and ITC (the
"Sale and Purchase Agreement"). This Note may not be sold, assigned,
transferred, pledged, or hypothecated, except that (i) SCANA may assign this
Note to SCANA Corporation or any wholly owned subsidiary of SCANA Corporation
upon written notice to ITC and (ii) with SCANA's prior written consent, which
shall not be unreasonably withheld or delayed, ITC may assign all of its
obligations and liabilities under this Note to any entity in which, at the time
of such assignment, ITC owns, directly or indirectly, a majority of the
outstanding equity interests upon execution of an Assignment and Assumption
Agreement in the form of Exhibit A attached hereto and delivery of a copy
---------
thereof to the Holder, whereupon ITC shall have no further obligation or
liability whatsoever hereunder and the assignee specified in such Assignment and
Assumption Agreement, as so executed, shall be the Maker for all purposes of
this Note.
This Note is subject to the terms of a Subordination Agreement, dated
March 27, 1997, among ITC, SCANA and First Union National Bank of North
Carolina, as Administrative Agent; provided, however, that the terms of such
-------- -------
Subordination Agreement shall not apply to this Note, and such Subordination
Agreement shall be of no further force and effect, after the obligations and
liabilities under this Note have been assigned by ITC to a person which is not a
Borrower (as defined in the Credit Agreement dated as of January 29, 1996 by and
among ITC and certain of its subsidiaries, the Lenders party thereto and First
Union National Bank of North Carolina) in the manner set forth in the
immediately preceding paragraph.
The occurrence of any one or more of the following shall
constitute an event of default ("Event of Default") hereunder:
(1) Failure to pay, when due, the principal, any interest, or any other
sum payable hereunder, and continuance of such failure for ten
business days after written notice of such failure to pay shall have
been received by Maker from Holder;
(2) Failure of the Maker generally to pay its debts as such debts become
due, the admission by the Maker in writing of its inability to pay its
debts as such debts become due, or the making by the Maker of any
general assignment for the benefit of creditors;
2
<PAGE>
(3) Commencement by the Maker of any case, proceeding, or other action
seeking reorganization, arrangement, adjustment, liquidation,
dissolution, or composition of it or its debts under any law relating
to bankruptcy, insolvency, or reorganization, or relief of debtors, or
seeking appointment of a receiver, trustee, custodian, or other
similar official for it or for all or any substantial part of its
property;
(4) Commencement of any case, proceeding, or other action against the
Maker seeking to have any order for relief entered against such Maker
as debtor, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution, or composition of such Maker or its debts
under any law relating to bankruptcy, insolvency, reorganization, or
relief of debtors, or seeking appointment of a receiver, trustee,
custodian, or other similar official for such Maker or for all or any
substantial part of the property of the Maker, and (i) the Maker
shall, by any act or omission, indicate its consent to, approval of,
or acquiescence in such case, proceeding, or action, or (ii) such
case, proceeding, or action results in the entry of an order for
relief which is not fully stayed within seven business days after the
entry thereof, or (iii) such case, proceeding, or action remains
undismissed for a period of fifteen days or more;
(5) Any representation or warranty of Maker made in the Sale and Purchase
Agreement shall prove to have been incorrect or misleading or breached
in any material respect on or as of any date on which it was made; or
(6) Maker shall at any time fail to observe, satisfy or perform in any
material respect any of its material covenants or agreements contained
in the Sale and Purchase Agreement and such default shall continue
unremedied for a period of 30 days after written notice of the
existence of such fault shall have been received by Maker from Holder.
Upon the occurrence of any such Event of Default hereunder, the
entire principal amount hereof, and all accrued and unpaid interest thereon, at
the option of the Holder and upon written notice to the Maker may be accelerated
and become immediately due and payable, and in addition thereto, and not in
substitution therefor, the Holder shall be entitled to exercise any one or more
of the rights and remedies provided by applicable law. Failure to exercise said
option or to pursue such other remedies shall not constitute a waiver of such
option or such other remedies or of the right to exercise any of the same in the
event of any subsequent Event of Default hereunder.
3
<PAGE>
The Maker promises to pay all reasonable costs and expenses (including
without limitation reasonable attorneys' fees and disbursements) incurred in
connection with the collection hereof.
No single or partial exercise by the Holder of any right hereunder
shall preclude any other or further exercise thereof or the exercise of any
other rights. No delay or omission on the part of the Holder in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note.
This Note and all agreements between the Maker and the Holder relating
hereto are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration or otherwise, shall the amount
paid or agreed to be paid to the Holder for the use, forbearance, or detention
of money hereunder exceed the maximum amount permissible under applicable law.
If from any circumstance whatsoever fulfillment of any provision hereof, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
---- -----
fulfilled shall be reduced to the limit of such validity, and if from any such
circumstance the Holder shall ever receive interest, or anything that might be
deemed interest under applicable law, which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal amount owing on account of this Note and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal of this Note, such excess shall be refunded to the Maker. All sums
paid or agreed to be paid to the Holder for the use, forbearance or detention of
the indebtedness of the Maker to the Holder shall, to the extent permitted by
applicable law, be deemed to be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
actual rate of interest on account of such indebtedness is uniform throughout
the term thereof. The terms and provisions of this paragraph shall control and
supersede every other provision of this Note and all other agreements between
the Maker and the Holder.
Whenever used herein, the words "Maker" and "Holder" shall be deemed
to include their respective permitted successors and assigns.
This Note shall be governed by and construed under and in accordance
with the laws of South Carolina (but not including the choice of law rules
thereof).
4
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Note, or
has caused this Note to be duly executed on its behalf, as of the day and year
first hereinabove set forth.
ITC HOLDING COMPANY, INC.
By: /s/Doug Shumate
------------------------------------------
Name: Doug Shumate
Title: Vice President
5
<PAGE>
Exhibit 12.1
Statement Re: Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
------------------------------------------------------- --------------------------
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 2,648,742 6,315,083
Interest element of rent expense 21,084 24,845 424,130 777,227 159,769 159,769
Fixed charges of unconsolidated subsidiary - 782,054 1,564,200 - - -
------------ ------------ ------------ ------------- ------------ ------------
294,843 1,104,127 8,160,751 27,044,016 2,808,511 6,474,852
============ ============ ============ ============= ============ ============
Earnings
Consolidated net income 136,997 (504,373) (3,909,749) (12,027,992) (1,299,433) (2,867,591)
Extraordinary loss - - - - (818,572) (818,572)
Provision for income taxes (113,248) 302,567 1,233,318 6,139,382 575,528 1,536,657
Fixed charges 294,843 1,104,127 8,160,751 27,044,016 2,808,511 6,474,852
------------ ------------ ------------ ------------- ------------ ------------
545,088 297,187 3,017,684 8,876,642 1,752,122 2,889,176
============ ============ ============ ============= ============ ============
Ratio of Earnings to Fixed Charges 1.85 0.27 0.37 0.33 0.62 0.45
============ ============ ============ ============= ============ ============
Coverage Deficiency N/A 806,940 5,143,067 18,167,374 1,056,389 3,585,676
</TABLE>
<PAGE>
Exhibit 21.1
Subsidiaries of ITC/\DeltaCom, Inc.
(after giving effect to the Reorganization)
ITC Transmission Systems, Inc., a Delaware corporation 1/
-
DeltaCom, Inc., an Alabama corporation 2/
-
GulfStates Transmission Systems, Inc., a Delaware corporation
- ------------------
1/ Includes the operations of ITC Transmission Systems II, Inc. and Eastern
- -
Telecom, Inc. (d/b/a/ InterQuest") Expected to be renamed "Interstate FiberNet,
Inc."
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
this Registration Statement of our report on the balance sheet of
ITC/\DeltaCom, Inc. as of March 31, 1997 dated June 3, 1997; our report on the
combined financial statements 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. (to be 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 June 3, 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 June 3, 1997), and to all references to our Firm
included in or made a part of this Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia July 11, 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 this Registration Statement.
MARTIN STUEDEMAN & ASSOCIATES, P.C.
Birmingham, Alabama July 11, 1997
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in 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
July 14, 1997
<PAGE>
EXHIBIT 25.1
FORM T-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
----------------
UNITED STATES TRUST COMPANY OF NEW YORK
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-3818954
(JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
114 WEST 47TH STREET 10036-1532
NEW YORK, NY (ZIP CODE)
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
UNITED STATES TRUST COMPANY OF NEW YORK
114 WEST 47TH STREET
NEW YORK, NY 10036-1532
(212) 852-1000
(AGENT FOR SERVICE)
----------------
ITC/\DELTACOM, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-2301135
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
206 WEST NINTH STREET 31833
WEST POINT, GA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
----------------
11% SENIOR NOTES DUE JUNE 1, 2007
(TITLE OF THE INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
ITC/\DeltaCom, Inc. currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and
15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
<TABLE>
<C> <S>
T-1.1 --Organization Certificate, as amended, issued by the State of New
York Banking Department to transact business as a Trust Company, is
incorporated by reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform Act
of 1990 (Registration No. 33-97056).
T-1.2 --Included in Exhibit T-1.1.
T-1.3 --Included in Exhibit T-1.1.
T-1.4 --The By-Laws of United States Trust Company of New York, as amended,
is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform Act
of 1990 (Registration No. 33-97056).
T-1.6 --The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform Act
of 1990.
T-1.7 --A copy of the latest report of condition of the trustee pursuant to
law or the requirements of its supervising or examining authority.
</TABLE>
NOTE
As of June 23, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U.S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information
to be furnished by the obligor and the trustee disclaims responsibility for
the accuracy or completeness of such information.
----------------
-2-
<PAGE>
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 23rd
day of June, 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Louis Young
-------------------------------
VICE PRESIDENT
-3-
<PAGE>
EXHIBIT T-1.6
THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE ACT.
UNITED STATES TRUST COMPANY OF NEW YORK
114 WEST 47TH STREET
NEW YORK, NY 10036
January 7, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY OF NEW
YORK
By: /s/ Gerard F. Ganey
-----------------------------------
Gerard F. Ganey
SENIOR VICE PRESIDENT
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and Due from Banks............................................ $ 75,754
Short-Term Investments............................................. 276,399
Securities, Available for Sale..................................... 925,886
Loans.............................................................. 1,638,516
Less:
Allowance for Credit Losses...................................... 13,168
----------
Net Loans........................................................ 1,625,348
Premises and Equipment............................................. 61,278
Other Assets....................................................... 120,903
----------
Total Assets..................................................... $3,085,568
==========
LIABILITIES
Deposits:
Non-Interest Bearing............................................. $ 645,424
Interest Bearing................................................. 1,694,581
----------
Total Deposits................................................. 2,340,005
Short-Term Credit Facilities....................................... 449,183
Accounts Payable and Accrued Liabilities........................... 139,261
----------
Total Liabilities................................................ $2,928,449
==========
STOCKHOLDER'S EQUITY
Common Stock....................................................... 14,995
Capital Surplus.................................................... 42,394
Retained Earnings.................................................. 98,926
Unrealized Gains (Losses) on Securities Available for Sale, Net of
Taxes............................................................. 804
----------
Total Stockholder's Equity......................................... 157,119
----------
Total Liabilities and Stockholder's Equity....................... $3,085,568
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named
bank do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkmann,
SVP & Controller
April 9, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This financial data schedule contains summary financial information extracted
from the combined balance sheets of Interstate Transmission Systems, Inc.,
Interstate Transmission Systems II, Inc., Gulf States Transmission Systems, Inc.
Eastern Telecom, Inc. d.b.a. InterQuest, and DeltaCom, Inc. (To be Reorganized
As ITC/\DeltaCom, Inc.) as of December 31, 1996 (see registration statement page
F-7) and the related combined statements of operations for the year ended
December 31, 1996 (see registration statement page F-8). 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> 12,256,698
<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 Interstate Transmission Systems, Inc.,
Interstate Transmission Systems II, Inc., Gulf States Transmission Systems,
Inc., Eastern Telecom, Inc. d.b.a. InterQuest, and DeltaCom, Inc. (To Be
Reorganized As ITC/\DeltaCom, Inc.) as of March 31, 1997 (see registration
statement page F-7) and the related combined statements of operations for the
three month period ended March 31, 1997 (see registration statement page F-8).
This information is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,447,289
<SECURITIES> 0
<RECEIVABLES> 16,235,153
<ALLOWANCES> 1,019,606
<INVENTORY> 676,101
<CURRENT-ASSETS> 22,740,372
<PP&E> 123,073,768
<DEPRECIATION> 13,181,217
<TOTAL-ASSETS> 192,450,427
<CURRENT-LIABILITIES> 66,248,176
<BONDS> 0
0
0
<COMMON> 826
<OTHER-SE> 35,278,332
<TOTAL-LIABILITY-AND-EQUITY> 192,450,427
<SALES> 25,422,578
<TOTAL-REVENUES> 25,422,578
<CGS> 12,197,321
<TOTAL-COSTS> 12,197,321
<OTHER-EXPENSES> 11,731,533
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,648,742
<INCOME-PRETAX> (1,130,521)
<INCOME-TAX> (264,471)
<INCOME-CONTINUING> (791,918)
<DISCONTINUED> 0
<EXTRAORDINARY> (507,515)
<CHANGES> 0
<NET-INCOME> (1,299,433)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.1
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997,
UNLESS EXTENDED (THE "EXPIRATION DATE").
[LOGO OF ITC/\DELTACOM APPEARS HERE]
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE ITS 11% SENIOR NOTES DUE JUNE 1, 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
11% SENIOR NOTES DUE JUNE 1, 2007
PURSUANT TO THE PROSPECTUS DATED , 1997
THE EXCHANGE AGENT
FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
BY FACSIMILE: BY MAIL:
(212) 780-0592 United States Trust Company of
Attention: Customer Service New York
Confirm by Telephone to: (800) P.O. Box 843, Cooper Station
548-6565 New York, New York 10276
Attention: Corporate Trust
Services
BY HAND BEFORE 4:30 P.M.: BY OVERNIGHT COURIER AND BY HAND
AFTER 4:30 P.M.:
United States Trust Company of United States Trust Company of
New York New York
111 Broadway 770 Broadway, 13th Floor
New York, New York 10006 New York, New York 10003
Attention: Lower Level Corporate
Trust Window
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Senior Notes (as
defined below) either if Senior Notes are to be forwarded herewith or if
tenders of Senior Notes are to be made by book-entry transfer to an account
maintained by United States Trust Company of New York (the "Exchange Agent")
at The Depository Trust Company ("DTC") pursuant to the procedures set forth
in "The Exchange Offer--Procedures for Tendering Senior Notes" in the
Prospectus.
Holders of Senior Notes whose certificates (the "Certificates") for such
Senior Notes are not immediately available or who cannot deliver their
Certificates, this Letter of Transmittal and all other required documents to
the Exchange Agent on or prior to the Expiration Date or who cannot complete
the procedures for book-entry transfer on a timely basis, may tender their
Senior Notes according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Procedures for Tendering Senior Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
List below the Senior Notes of which you are a holder. If the space provided
below is inadequate, list the certificate numbers and principal amount on a
separate signed schedule and attach that schedule to this Letter of
Transmittal. See Instruction 3.
ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF SENIOR NOTES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES) OF
REGISTERED HOLDER
(FILL IN, IF BLANK) SENIOR NOTES TENDERED
- ------------------------------------------------------------------------------
CERTIFICATE
NUMBER(S)*
(ATTACH
ADDITIONAL PRINCIPAL AMOUNT PRINCIPAL AMOUNT
LIST IF (ATTACH ADDITIONAL TENDERED (IF LESS
NECESSARY) LIST IF NECESSARY) THAN ALL)**
<S> <C> <C> <C>
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
TOTAL SHARES TENDERED:
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by book-entry holders. Such holders should check
the appropriate box below and provide the requested information.
** Need not be completed if tendering for exchange all Senior Notes held.
Senior Notes may be tendered in whole or in part in integral multiples
of $1,000 principal amount at maturity. All Senior Notes held shall be
deemed tendered unless a lesser number is specified in this column. See
Instruction 4.
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY. SEE INSTRUCTION 1)
[_]CHECK HERE IF TENDERED SENIOR NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
DTC Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED SENIOR NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): ___________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Notice of Guaranteed Delivery: _____________________________________
Institution Which Guaranteed Delivery: _____________________________________
If Guaranteed Delivery is to be made by book-entry transfer:
Name of Tendering Institution: _____________________________________________
DTC Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED SENIOR NOTES FOR YOUR
OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
_____________________________________________________________________
Telephone Number and Contact Person: _______________________________________
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to ITC/\DeltaCom, Inc., a Delaware corporation
(the "Company"), the above described principal amount of the Company's 11%
Senior Notes due June 1, 2007 (the "Senior Notes") in exchange for a like
principal amount of the Company's 11% Senior Notes due June 1, 2007 (the
"Exchange Notes") which have been registered under the Securities Act of 1933
(the "Securities Act"), upon the terms and subject to the conditions set forth
in the Prospectus dated , 1997 (as the same may be amended or supplemented
from time to time, the "Prospectus"), receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which, together with the Prospectus,
constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of the Senior
Notes tendered herewith, the undersigned hereby sells, assigns and transfers
to or upon the order of the Company all right, title and interest in and to
such Senior Notes as are being tendered herewith. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as its agent and
attorney-in-fact (with full knowledge that the Exchange Agent is also acting
as agent of the Company in connection with the Exchange Offer and as Trustee
under the Indenture for the Senior Notes and the Exchange Notes) with respect
to the tendered Senior Notes, with full power of substitution (such power of
attorney being an irrevocable power coupled with an interest), subject only to
the right of withdrawal described in the Prospectus, to: (i) deliver such
Senior Notes to the Company together with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company upon receipt
by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to be
issued in exchange for such Senior Notes; (ii) present Certificates for such
Senior Notes for transfer, and to transfer such Senior Notes on the account
books maintained by DTC; and (iii) receive for the account of the Company all
benefits and otherwise exercise all rights of beneficial ownership of such
Senior Notes, all in accordance with the terms and conditions of the Exchange
Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE SENIOR
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE
SENIOR NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES.
THE UNDERSIGNED 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 HEREBY. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF
THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Senior Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Senior Notes. The
Certificate number(s) and the Senior Notes that the undersigned wishes to
tender should be indicated in the appropriate boxes above.
If any tendered Senior Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Senior Notes
than are tendered or accepted for exchange, Certificates for such nonexchanged
or nontendered Senior Notes will be returned (or, in the case of Senior Notes
tendered by book-entry transfer, such Senior Notes will be credited to an
account maintained at DTC), without expense to the tendering holder promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Senior Notes pursuant to any one
of the procedures described in "The Exchange Offer--Procedures for Tendering
Senior Notes" in the Prospectus and in the instructions herein will, upon the
Company's acceptance for exchange of such tendered Senior Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Senior Notes tendered
hereby.
<PAGE>
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Senior Notes, that such Exchange Notes be credited to the account
indicated above maintained at DTC. If applicable, substitute Certificates
representing Senior Notes not exchanged or not accepted for exchange will be
issued to the undersigned or, in the case of a book-entry transfer of Senior
Notes, will be credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please deliver Exchange Notes to the undersigned at the address shown below
the undersigned's signature.
BY TENDERING SENIOR NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT: (i) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY (WITHIN THE MEANING OF RULE 405 UNDER THE
SECURITIES ACT), OR IF THE UNDERSIGNED IS AN AFFILIATE, THE UNDERSIGNED WILL
COMPLY WITH THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT TO THE EXTENT APPLICABLE; (ii) ANY EXCHANGE NOTES TO BE
RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS
BUSINESS; AND (iii) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH
ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE
SECURITIES ACT) OF EXCHANGE NOTES TO BE RECEIVED IN THE EXCHANGE OFFER. IF THE
UNDERSIGNED IS NOT A BROKER-DEALER, BY TENDERING SENIOR NOTES AND EXECUTING
THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED REPRESENTS AND AGREES THAT IT IS
NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF EXCHANGE
NOTES. IF THE UNDERSIGNED IS A BROKER-DEALER, BY TENDERING SENIOR NOTES AND
EXECUTING THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED REPRESENTS AND AGREES
THAT SUCH SENIOR NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT
AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT
WILL DELIVER A PROSPECTUS MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN
CONNECTION WITH ANY RESALE OF EXCHANGE NOTES (PROVIDED THAT, BY SO
ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH 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 THE
PROSPECTUS, AS AMENDED OR SUPPLEMENTED, TO ANY PARTICIPATING BROKER-DEALER
THAT REASONABLY REQUESTS SUCH DOCUMENTS IN CONNECTION WITH ANY SUCH RESALE.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus and in the Instructions contained in this Letter of
Transmittal, this tender is irrevocable.
<PAGE>
PLEASE SIGN HERE PLEASE SIGN HERE
_____________________________________ _____________________________________
Authorized Signature Authorized Signature
Name: _______________________________ Name: _______________________________
Title: ______________________________ Title: ______________________________
Address: ____________________________ Address: ____________________________
_____________________________________ _____________________________________
Telephone Number: ___________________ Telephone Number: ___________________
Dated: ______________________________ Dated: ______________________________
- ------------------------------------- -------------------------------------
Taxpayer Identification or Social Taxpayer Identification or Social
Security Number Security Number
(NOTE: Signature(s) must be guaranteed if required by Instructions 2 and 5.
This Letter of Transmittal must be signed by the registered holder(s) exactly
as the name(s) appear(s) on Certificate(s) for the Senior Notes hereby
tendered or on a security position listing, or by any person(s) authorized to
become the registered holder(s) by endorsements and documents transmitted
herewith, including such opinions of counsel, certifications and other
information as may be required by the Company or the Trustee for the Senior
Notes to comply with the restrictions on transfer applicable to the Senior
Notes. If signature is by an attorney-in-fact, executor, administrator,
trustee, guardian, officer of a corporation or another acting in a fiduciary
capacity or representative capacity, please set forth the signer's full title.
See Instructions 2 and 5. Please complete substitute Form W-9 below.)
<PAGE>
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 2 AND 5)
Signature(s) Guaranteed by an
Eligible Institution: ______________
Date: ______________________________
AUTHORIZED SIGNATURE
Name of Eligible Institution Address: ___________________________
Guaranteeing Signature: ____________
Capacity (full title): _____________ ____________________________________
Telephone Number: __________________ ____________________________________
SPECIAL ISSUANCE INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS (SEE
INSTRUCTIONS 2, 5 AND 6) INSTRUCTIONS 2, 5 AND 6)
To be completed ONLY if the Ex- To be completed ONLY if the Ex-
change Notes or any Senior Notes change Notes or any Senior Notes
that are not tendered are to be is- that are not tendered are to be
sued in the name of someone other sent to someone other than the
than the registered holder(s) of registered holder(s) of the Se-
the Senior Notes whose name(s) ap- nior Notes whose name(s) ap-
pear(s) above. pear(s) above, or to such regis-
tered holder at an address other
than that shown above.
Issue: Mail:
[_] Senior Notes not tendered, to: [_] Senior Notes not tendered,
to:
[_] Exchange Notes, to: [_] Exchange Notes, to:
Name(s) ____________________________ Name(s) _________________________
Address ____________________________ Address _________________________
____________________________________ _________________________________
Telephone Number: __________________ Telephone Number: _______________
____________________________________ _________________________________
(TAX IDENTIFICATION OR SOCIAL (TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER) SECURITY NUMBER)
<PAGE>
INSTRUCTIONS
(FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER)
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in "The
Exchange Offer--Procedures for Tendering Senior Notes" in the Prospectus.
Certificates, or timely confirmation of a book-entry transfer of such Senior
Notes into the Exchange Agent's account at DTC, as well as this Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its address
set forth herein on or prior to the Expiration Date. The term "book-entry
confirmation" means a timely confirmation of book-entry transfer of Senior
Notes into the Exchange Agent's account at DTC. Senior Notes may be tendered
in whole or in part in integral multiples of $1,000 principal amount at
maturity.
Holders who wish to tender their Senior Notes and: (i) whose Certificates
for such Senior Notes are not immediately available; (ii) who cannot deliver
their Certificates, this Letter of Transmittal and all other required
documents to the Exchange Agent prior to the Expiration Date; or (iii) who
cannot complete the procedures for delivery by book-entry transfer on a timely
basis, may tender their Senior Notes by properly completing and duly executing
a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures
set forth in "The Exchange Offer--Procedures for Tendering Senior Notes" in
the Prospectus. Pursuant to such procedures: (i) such tender must be made by
or through an Eligible Institution (as defined below); (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form accompanying this Letter of Transmittal, must be received by the
Exchange Agent prior to the Expiration Date; and (iii) the Certificates (or a
book-entry confirmation) representing all tendered Senior Notes, in proper
form for transfer, together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent within three New York Stock Exchange
trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer--Procedures for Tendering
Senior Notes" in the Prospectus.
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. For Senior Notes to be properly tendered pursuant to the guaranteed
delivery procedure, the Exchange Agent must receive a Notice of Guaranteed
Delivery prior to the Expiration Date. As used herein and in the Prospectus,
"Eligible Institution" means 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 or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF SENIOR NOTES, THIS 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.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance
of such tender.
<PAGE>
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if: (i) this Letter of Transmittal is signed by the
registered holder (which shall include any participant in DTC whose name
appears on a security position listing as the owner of the Senior Notes) of
Senior Notes tendered herewith, unless such holder has completed either the
box entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" above; or (ii) such Senior Notes are tendered for the
account of a firm that is an Eligible Institution. In all other cases, an
Eligible Institution must guarantee the signature(s) on this Letter of
Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Senior Notes Tendered" is inadequate, the Certificate number(s) and/or the
principal amount of Senior Notes and any other required information should be
listed on a separate signed schedule and attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Senior Notes will be
accepted only in integral multiples of $1,000 principal amount at maturity. If
less than all the Senior Notes evidenced by any Certificate submitted are to
be tendered, fill in the principal amount of Senior Notes which are to be
tendered in the box entitled "Principal Amount Tendered (if less than all)."
In such case, new Certificate(s) for the remainder of the Senior Notes that
were evidenced by the old Certificate(s) will be sent to the tendering holder,
unless the appropriate boxes on this Letter of Transmittal are completed,
promptly after the Expiration Date. All Senior Notes represented by
Certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
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 above 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
Certificate(s), 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
serial numbers on the particular Certificates for the 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 "The Exchange
Offer--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 in the Prospectus
under "The Exchange Offer--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.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Senior
Notes tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the Certificate(s) or on a security position
listing, without alteration, enlargement or any change whatsoever.
If any of the Senior Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
<PAGE>
If any tendered Senior Notes are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are names in
which Certificates are registered.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons'
authority to so act.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Senior Notes listed and transmitted hereby, the
Certificate(s) must be endorsed or accompanied by appropriate bond power(s),
signed exactly as the name(s) of the registered owner appear(s) on the
Certificate(s), and also must be accompanied by such opinions of counsel,
certifications and other information as the Company or the Trustee for the
Senior Notes may require in accordance with the restrictions on transfer
applicable to the Senior Notes. Signature(s) on such Certificate(s) or bond
power(s) must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Notes or
Certificates for Senior Notes not exchanged are to be issued in the name of a
person other than the signer of this Letter of Transmittal, or are to be sent
to someone other than the signer of this Letter of Transmittal or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. In the case of issuance in a different name,
the taxpayer identification number of the person named must also be indicated.
Holders tendering Senior Notes by book-entry transfer may request that Senior
Notes not exchanged be credited to such account maintained at DTC as such
holder may designate. If no such instructions are given, Senior Notes not
exchanged will be returned by mail or, if tendered by book-entry transfer, by
crediting the account indicated above maintained at DTC.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Senior Notes, 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 set forth in the Prospectus under
"The Exchange Offer--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 this Letter of Transmittal and the instructions hereto) will be
final and binding. 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 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.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth above. Additional copies of the Prospectus, the
Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained
from the Exchange Agent or from your broker, dealer, commercial bank, trust
company or other nominee.
9. BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax
law, a holder whose tendered Senior Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Senior Notes
exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
<PAGE>
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 3 is checked, the holder or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN
is provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-
9. If the holder furnishes the Exchange Agent with its TIN within 60 days
after the date of the Substitute Form W-9, the amounts retained during the 60
day period will be remitted to the holder and no further amounts shall be
retained or withheld from payments made to the holder thereafter. If, however,
the holder has not provided the Exchange Agent with its TIN within such 60 day
period, amounts withheld will be remitted to the IRS as backup withholding. In
addition, 31% of all payments made thereafter will be withheld and remitted to
the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Senior Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Senior Notes. If the Senior Notes are registered in
more than one name or are not in the name of the actual owner, consult the
Instructions to Form W-9 (Request for Identification Number and Certification)
for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign person
may qualify as an exempt recipient by submitting a properly completed IRS Form
W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the Instructions to Form W-9 (Request for
Identification Number and Certification) for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. federal income tax. Rather, the
U.S. federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. MUTILATED, LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate
representing Senior Notes has been mutilated, lost, destroyed or stolen, the
holder should promptly notify the Exchange Agent. The holder will then be
instructed as to the steps that must be taken in order to replace the
Certificate. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing mutilated, lost, destroyed or
stolen Certificates have been followed.
11. SECURITY TRANSFER TAXES. 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 transfer tax or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer tax will
be billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), TOGETHER
WITH CERTIFICATES REPRESENTING TENDERED SENIOR NOTES OR A BOOK ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
<PAGE>
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS:
(SEE INSTRUCTION 9)
PAYER'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
PART 1--PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR
SUBSTITUTE TIN ON THE LINE AT RIGHT AND EMPLOYER IDENTIFICATION
CERTIFY BY SIGNING AND NUMBER
FORM W-9 DATING BELOW -----------------------
----------------------------------------------------------
DEPARTMENT OF PART 2--CERTIFICATION--Under penalties of perjury, I
THE TREASURY certify that:
INTERNAL REVENUE (1) The number shown on this form is my correct
SERVICE taxpayer identification number (or I am waiting for
a number to be issued to me);
PAYER'S (2) I am not subject to backup withholding either
REQUEST FOR because: (a) I am exempt from backup withholding;
TAXPAYER'S (b) I have not been notified by the Internal
IDENTIFICATION Revenue Service ("IRS") that I am subject to backup
NUMBER (TIN) withholding as a result of a failure to report all
interest or dividends; or (c) the IRS has notified
me that I am no longer subject to backup
withholding; and
(3) Any other information provided on this form is true
and correct.
CERTIFICATION INSTRUCTIONS--You must cross out item (2)
above if you have been notified by the IRS that you are
subject to backup withholding because of underreporting
interest or dividends on your tax return and you have
not been notified by the IRS that you are no longer
subject to backup withholding.
----------------------------------------------------------
SIGNATURE ____________________________ PART 3--
Awaiting
TIN [_]
DATE _________________________________
----------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN
CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF
31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
----------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer
identification number has not been issued to me, and
either (1) I have mailed or delivered an application to
receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social
Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I
understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of
all payments made to me on account of the Exchange
Notes shall be retained until I provide a taxpayer
identification number to the Exchange Agent and that,
if I do not provide my taxpayer identification number
within 60 days, such retained amounts shall be remitted
to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me
thereafter will be withheld and remitted to the
Internal Revenue Service until I provide a taxpayer
identification number.
SIGNATURE: _________________ DATE: __________________
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
11% SENIOR NOTES DUE JUNE 1, 2007
(THE "SENIOR NOTES")
OF
[LOGO OF ITC/\DELTACOM APPEARS HERE]
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to tender Senior Notes pursuant to the Exchange Offer
described in the Prospectus dated , 1997 (as the same may be amended or
supplemented from time to time, the "Prospectus") of ITC/\DeltaCom, Inc., a
Delaware corporation (the "Company"), if certificates for the Senior Notes are
not immediately available, or time will not permit the Senior Notes, the
Letter of Transmittal and all other required documents to be delivered to
United States Trust Company of New York (the "Exchange Agent") prior to 5:00
p.m., New York City time, on , 1997 or such later date and time to which the
Exchange Offer may be extended (the "Expiration Date"), or the procedures for
delivery by book-entry transfer cannot be completed on a timely basis. This
Notice of Guaranteed Delivery, or one substantially equivalent to this form,
must be delivered by hand or sent by facsimile transmission or mail to the
Exchange Agent, and must be received by the Exchange Agent prior to the
Expiration Date. See "The Exchange Offer--Procedures for Tendering Senior
Notes" in the Prospectus. Capitalized terms used but not defined herein shall
have the same meaning given them in the Prospectus.
The Exchange Agent for the Exchange Offer is:
UNITED STATES TRUST COMPANY OF NEW YORK
By Facsimile: By Mail: By Hand before 4:30
p.m.:
(212) 780-0592 United States Trust
Company of New York United States Trust
Company of New York
Attention: Customer P.O. Box 843, Cooper
Service Confirm by Station 111 Broadway
Telephone to: (800) 548- New York, New York 10276 New York, New York 10006
6565 Attention: Corporate Attention: Lower Level
Trust Services 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 OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, the Senior Notes indicated below pursuant to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering Senior Notes."
Name(s) of Registered Holder(s): ______________________________________________
(Please Print or Type)
Signature(s): _________________________________________________________________
Address(es): __________________________________________________________________
_______________________________________________________________________________
Area Code(s) and Telephone Number(s): _________________________________________
Account Number: _______________________________________________________________
Date: _________________________________________________________________________
Certificate No(s). Principal Amount of
(if available) Senior Notes Tendered*
_________________________________ _____________________________________
_________________________________ _____________________________________
_________________________________ _____________________________________
_________________________________ _____________________________________
_________________________________ _____________________________________
_________________________________ _____________________________________
* Must be in integral multiples of $1,000 principal amount at maturity.
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank
or trust company having an office or a correspondent in the United States or
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, hereby guarantees that the
undersigned will deliver to the Exchange Agent the certificates representing
the Senior Notes being tendered hereby in proper form for transfer (or a
confirmation of book-entry transfer of such Senior Notes, into the Exchange
Agent's account at the book-entry transfer facility of The Depository Trust
Company ("DTC")) with delivery of a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, all within three New York Stock
Exchange trading days after the date of execution of the Notice of Guaranteed
Delivery.
Name of Firm ____________________ _____________________________________
Address _________________________ Authorized Signature
_________________________________ Name ________________________________
Zip Code Please Print or Type
Telephone No. ___________________ Title _______________________________
Dated: ______________________________
The institution that completes this form must communicate the guarantee to
the Exchange Agent and must deliver the certificates representing any Senior
Notes (or a confirmation of book-entry transfer of such Senior Notes into the
Exchange Agent's account at DTC) and the Letter of Transmittal to the Exchange
Agent within the time period shown herein. Failure to do so could result in a
financial loss to such institution.
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